Annual report pursuant to Section 13 and 15(d)

Options and Warrants

v2.4.1.9
Options and Warrants
12 Months Ended
Dec. 31, 2014
Options and Warrants [Abstract]  
OPTIONS AND WARRANTS
7. OPTIONS AND WARRANTS

 

On April 30, 2014, the effective date of the Redomestication and effective date of the Merger Exchange Ratio, there were a total of 36,814 vested and 24,723 unvested options carried over to the reverse merger with DAC on June 3, 2014 with strike prices ranging from $1.67 to $126.40. During September 2014, the holders of these options voluntarily agreed to terminate their options. At December 31, 2014 there are no outstanding options.

 

On April 30, 2014, the effective date of the Redomestication and effective date of the Merger Exchange Ratio, there were a total of 673,683 warrants carried over to the reverse merger with DAC on June 3, 2014 with strike prices ranging from $2.53 to $16.57. A total of 188,676 of these warrants with strike prices of $5.06 expired between July and September 2014 leaving a total of 485,007 outstanding warrants.

 

During May 2014, the Company issued a total of 1,700,000 warrants for services. The warrants have a term of three years, and exercise price of $0.01. The 1,700,000 warrants were exercised in July 2014 for a total of $17,000. As further described above in Note 4, on June 3, 2014, the Company issued 2,700,000 warrants to purchase one share of common stock at an exercise price of $1.00 per warrant share to investors who purchased Series E Preferred Stock. The exercise price of $1.00 per warrant may be adjusted any time during the first twenty-four months from issuance under the terms of a Favored Nations Provision contained in the warrant. If at any time during that twenty-four month period the Company should issue common stock or convertible securities at a price lower than $1.00 per share, unless the warrant holder consents to such lower price issuance, then the exercise price of the warrant shall be automatically reduced to reflect such other lower price and the number of warrant securities shall be adjusted to reflect such lower price. The warrants expire on June 3, 2017. In August 2014, all seven investors holding the warrants attached to Series E Preferred Stock executed cashless exercises of their warrants resulting in the issuance of 372,414 shares of restricted common stock.

 

Because the 2,700,000 warrants issued on June 3, 2014 have full reset adjustments tied to future issuances of equity securities by the Company, they are subject to derivative liability treatment under ASC 815-40-15 “Determining whether an Instrument (or Embedded feature) is Indexed to an Entity’s Own Stock.” ASC 815-40-15 requires as of the date the warrant is issued, the derivative liability to be measured at fair value and re-evaluated at the end of each reporting period.

 

As of June 3, 2014, the fair value of the warrants derivative liability was $2,159,824 – see Note #4. On August 26, 2014, when the warrants were exercised, the Company determined the fair value of the derivative liability to be $2,510,793, and upon warrant exercise, the derivative liability was written off to additional paid in capital.

 

As a result of the warrant exercises, as of December 31, 2014, the fair value of the warrants derivative liability is $0, and the Company recognized a loss on derivative liability of $350,969 for the year ended December 31, 2014. The fair value of the derivative liability was estimated at the date of grant and the date of warrant exercised using a Black-Scholes option pricing model.

 

The following table summarizes information about outstanding warrants at December 31, 2014:

 

  Year Issued   Number
Outstanding
    Remaining
Contractual Life in Years
    Number
Currently Exercisable
    Weighted
Average Exercise
Price
 
  2010     16,780       0.6       16,780     $ 6.26  
  2011     418,780       2.0       418,780     $ 4.84  
  2012     49,447       3.0       49,447     $ 7.58  
  Total     485,007       2.0       485,007     $ 5.17