Annual report pursuant to Section 13 and 15(d)

Warrants

v2.4.1.9
Warrants
12 Months Ended
Dec. 31, 2014
Equity [Abstract]  
Warrants

NOTE 16 – WARRANTS

 

On February 2, 2014, the Company issued warrants in an investor in the Company’s common stock as more fully discussed in footnote 14. These warrants allowed the investor to purchase 100,000 share of common stock at $.80 per share. The warrants vest immediately and have a term of three years.

 

On June 25, 2014, two investors in the Company’s common stock converted their warrants to common stock in a cashless conversion. The warrants were converted in 136,000 shares of common stock at $.05 per share.

 

On September 26, 2014, the Company issued warrants to investors for them to purchase 423,076 shares of common stock at $.65 per share which vest immediately and have a five year term, and on October 7, 2014, the Company issued warrants to purchase 199,396 shares of common stock at a price to be determined at conversion in connection with the convertible debt discussed in footnote 11. These warrants vest immediately and have a five year term.

 

On July 23, 2013, the Company issued warrants to various investors in the Company’s stock to replace warrants previously issued to these investors in 2012. These warrants allowed investors to purchase 1,100,000 shares of the common stock at $.25 per share. The warrants vest immediately and have a term of three years. Because the original warrants issued in 2012 had zero value unless a financing transaction was completed, which it was not completed in time, the replacement warrants issued for the original warrants did not have such a restriction, and therefore, the new warrants have a fair value of $54,000, which was calculated using the Black-Scholes option pricing model. The $54,000 has been recorded as compensation expense during the year ended December 31, 2013 and has been included as a separate line item in the accompanying consolidated statement of operations for the year ended December 31, 2013.

 

On June 1, 2013, the Company issued 1,740,000 warrants in connection with the convertible debt discussed in footnote 11.

 

From July 30, 2013 to November 15, 2013, the Company issued warrants to various investors in the Company’s stock as more fully described in footnote 14. These warrants allowed the investors to purchase 6,266,000 shares of common stock at $.50 per share. The warrants vest immediately and have a term of three years.

 

Fair value is generally based on independent sources such as quoted market prices or dealer price quotations. To the extent certain financial instruments trade infrequently or are non-marketable securities, they may not have readily determinable fair values. The Company estimated the fair value of the warrants using a Black-Scholes option pricing model and available information that management deems most relevant. The stock price is the closing price of the Company’s stock on the valuation date; the risk free interest rate is based on the U.S. Government Securities average rate for 1 and 2 year maturities on the date of issuance; the volatility is a statistical measure (standard deviation) of the tendency of the Company’s stock price to change over time; the exercise price is the price at which the Warrants can be purchased by exercising prior to its expiration; the dividend yield is not applicable due to the Company not intending to declare dividends; the contractual life is based on the average exercise period of the Warrants; and the fair market value is value of the warrants based on the Black-Scholes model on the valuation date. 

 

The following table provides the valuation inputs used to value the warrants issued in 2014 and 2013:

 

    2014     2013  
Year Options were granted            
Stock price range   $ .12 - 1.25     $ .05 -.25  
Risk-free interest rate     .61 %     .61 %
Volatility Factor     300 %     300 %
Exercise Price   $ .65 to .80     $ .50  
Dividend Yield     0 %     0 %
Contractual life (years)     5 years       3 years  
Fair Market Value, approximately   $ 681,000     $ 355,000  

 

The following represents a summary of the Warrants outstanding at December 31, 2014 and 2013 and changes during the years then ended:

 

    Warrants     Weighted
Average
Exercise Price
 
Outstanding, December 31, 2012     -     $ -  
Granted     9,106,000       .42  
Outstanding, December 31, 2013     9,106,000     $ .42  
Granted     722,472       .65  
Warrants exchanged for common stock     (135,932 )     (.05 )
Outstanding, December 31, 2014     9,692,540     $ .44