EQUITY

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Note 13 - EQUITY

 The Company’s Articles of Incorporation, as amended, authorize the issuance of two classes of stock to be designated “Common Stock” and “Preferred Stock”. The Preferred Stock may be divided into such number of series and with the rights, preferences, privileges and restrictions as the Board of Directors may determine.

 Series B Convertible Redeemable Preferred Stock

 The Company had 239,400 shares of Series B Preferred outstanding as of December 31, 2013 and 2012. At December 31, 2013 and 2012, the Company had cumulative undeclared dividends of approximately  $8,000 ($0.03 per share). There were no conversions of Series B Preferred into common stock during the year ended December 31, 2013 or 2012.

 Common Stock

 The following table summarizes outstanding common stock activity for the following periods:

	Common Stock
Shares outstanding at December 31, 2011		67,988,916
Shares issued pursuant to warrants exercised for cash		7,052,647
Shares issued pursuant to cashless warrants exercised		1,573,362
Shares issued pursuant to option exercises		24,924
Shares outstanding at December 31, 2012		76,639,849
Shares issued pursuant to warrants exercised for cash		6,132,779
Shares issued pursuant to cashless warrants exercised		4,458,493
Conversion of related-party notes payable into common stock		18,182
Shares issued as compensation in lieu of cash		264,000
Shares issued pursuant to option exercises		35,310
Shares outstanding at December 31, 2013		87,548,613

 During the year ended December 31, 2013, the Company issued 35,310 shares of common stock pursuant to the exercise of 35,310 options for cash proceeds of approximately $11,000.  During the year ended December 31, 2013, the Company issued 6,132,779 shares of common stock pursuant to the exercise of 6,132,779 warrants for cash proceeds of approximately $3,291,000. During the year ended December 31, 2013, the Company issued 4,458,493 shares of common stock pursuant to the cashless exercise of 6,601,173 warrants. Also during the year ended December 31, 2013, the Company issued 18,182 shares of common stock pursuant to the conversion of $10,000 of Related-Party Convertible notes payable principal. The Company also issued 144,000 shares of its common stock to certain members of the Company’s Board of Directors as compensation for services to be rendered through December 31, 2014.  Such shares are forfeitable should the Board members’ service be terminated. The Company also issued 120,000 shares of common stock pursuant to the achievement of certain contractual vesting conditions contained in previously issued restricted stock grants to non-affiliated consultants.

 Warrants

 As of December 31, 2013, warrants to purchase 6,598,416 shares of common stock at prices ranging from $0.50 to $1.72 were outstanding. All warrants are exercisable as of December 31, 2013 and expire at various dates through December 2016, with the exception of an aggregate of 330,000 warrants, which become exercisable only upon the attainment of specified events.

 The following table summarizes warrant activity for the following periods:

	Warrants			Weighted-
				Average
				Exercise Price
Balance at December 31, 2011		28,453,760		$	0.52
Granted		305,000		$	0.92
Expired / Canceled		(12,000	)	$	0.50
Exercised		(9,958,275	)	$	0.50
Balance at December 31, 2012		18,788,485		$	0.56
Granted		1,232,632		$	1.01
Expired / Canceled		(688,749	)	$	1.49
Exercised		(12,733,952	)	$	0.52
Balance at December 31, 2013		6,598,416		$	0.63

 During the year ended December 31, 2013, the Company issued to certain consultants warrants to purchase an aggregate of 110,000 shares of the Company’s common stock. Such warrants have exercise prices ranging from $1.08 to $1.15 per share and have terms ranging from one to three years from the date of issuance. An aggregate of 80,000 of these warrants become exercisable only upon the attainment of specified events. No such events were obtained during the year ended December 31, 2013.

 During the year ended December 31, 2013, the Company issued to an existing shareholder and member of our Board of Directors warrants to purchase 1,052,632 shares of the Company’s common stock. Such warrants have an exercise price of $0.95 per share and a term of two years from the date of issuance.

 During the year ended December 31, 2013, the Company issued to certain members of a newly established advisory board, warrants to purchase an aggregate of 70,000 shares of the Company’s common stock. Such warrants have an exercise price of $1.72 per share and have a two year term. The Company recorded the estimated grant date fair value of these warrants using the Black-Scholes option valuation model as a component of general and administrative expense.

 During the year ended December 31, 2013, there were 6,601,173 warrants exercised pursuant to cashless transactions and 688,749 warrants expired. During the year ended December 31, 2013, there were 6,132,779 warrants exercised for cash resulting in cash proceeds to the Company of approximately $3,291,000. The Company issued 4,458,493 shares of its common stock pursuant to cashless warrant exercises and 6,132,779 shares of its common stock pursuant to warrants exercised for cash.

 The following table summarizes information regarding the warrants outstanding as of December 31, 2013:

Exercise Price		Number Outstanding	Weighted—Average  Remaining Life (Years)	Weighted—Average  Exercise Price
$	0.50	4,795,504	2.50	$	0.50
$	0.80	150,000	3.00	$	0.80
$	0.95	1,052,632	1.24	$	0.95
$	0.98	100,000	0.63	$	0.98
$	1.00	265,280	0.58	$	1.00
$	1.08	50,000	0.08	$	1.08
$	1.10	75,000	1.93	$	1.10
$	1.14	30,000	1.04	$	1.14
$	1.15	5,000	0.05	$	1.15
$	1.25	5,000	0.75	$	1.25
$	1.72	70,000	1.69	$	1.72
		6,598,416