Quarterly report pursuant to sections 13 or 15(d)

STOCKHOLDERS' EQUITY

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STOCKHOLDERS' EQUITY
 3 Months Ended
Mar. 31, 2014
Equity [Abstract]  
STOCKHOLDERS' EQUITY

On December 7, 2011, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada in order to increase the Company’s authorized capital to 200,000,000 shares of common stock from 75,000,000 shares, change the par value to $0.0001 per share from $.001 per share, and authorized new 50,000,000 shares of preferred stock, par value $0.0001 per share.

 

On June 24, 2013, the reverse stock split ratio of one (1) for thirteen (13) basis was approved by the Board of Directors. On July 18, 2013, the Company filed a certificate of amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada in order to effectuate a reverse stock split of the Company’s issued and outstanding common stock, par value $0.0001 per share on a one (1) for thirteen (13) basis. All share and per share values for all periods presented in the accompanying consolidated financial statements are retroactively restated for the effect of the reverse stock split.

 

Common Stock Warrants

 

During the three months ended March 31, 2014, the Company recorded stock based compensation expense of $10,394 in connection with vested warrants. At March 31, 2014, there was a total of $34,646 of unrecognized compensation expense related to this non-vested warrant-based compensation arrangements.

 

A summary of the status of the Company's outstanding stock warrants and changes during the period then ended is as follows:

 

    Number of Warrants     Weighted Average Exercise Price     Weighted Average Remaining Contractual Life (Years)  
Balance at December 31, 2013     708,260     $ 6.66       2.74  
Granted     -       -       -  
Cancelled     (23,077)       -       -  
Forfeited     -       -       -  
Exercised     -       -       -  
Balance at March 31, 2014     685,183     $ 6.66       2.31  
                         
Warrants exercisable at March 31, 2014     678,773     $ 6.67          
Weighted average fair value of warrants granted during the period ended           $ -          

 

Common Stock Options

 

For the three months ended March 31, 2014 the Company recorded stock-based compensation of $354,132, stock based consulting expense of $128,787 and stock-based legal fees of $5,750 related to vested options. At March 31, 2014, there was a total of $3,071,551 of unrecognized compensation expense related to these non-vested option-based compensation arrangements discussed above.

 

A summary of the stock options as of March 31, 2014 and changes during the period are presented below:

 

    Number of Options     Weighted Average Exercise Price     Weighted Average Remaining Contractual Life (Years)  
Balance at December 31, 2013     1,338,076       5.83       5.21  
Granted     -       -       -  
Exercised     -       -       -  
Forfeited     (190,384 )      5.90       -  
Cancelled     -       -       -  
Balance outstanding at March 31, 2014     1,147,692     $ 5.85       4.61  
                         
Options exercisable at March 31, 2014     242,580     $ 6.13          
Options expected to vest     905,112                  
Weighted average fair value of options granted during the period           $ -          

 

Stock options outstanding at March 31, 2014 as disclosed in the above table have approximately $722,000 intrinsic value at the end of the period.

 

Restricted Stock Unit

 

On November 13, 2013, the Company entered into a two year consulting agreement with Jeff Feinberg (the “Feinberg Agreement”), pursuant to which we agreed to grant Mr. Feinberg a restricted stock unit (“RSU”) for 100,000 shares of our restricted common stock.  The RSU vests in two installments:  50% on the one-year anniversary of the Feinberg Agreement (the “First Vesting”) and the remaining 50% on the second year anniversary of the Feinberg Agreement (the “Second Vesting”).  The shares of common stock will be issued upon Mr. Feinberg’s meeting each of the two vesting requirements.  During the first six months, the Feinberg Agreement can be terminated without any vesting under certain circumstances described in the Feinberg Agreement.  If the Feinberg Agreement is terminated following the First Vesting but prior to the Second Vesting, the RSU is subject to acceleration of the Second Vesting under certain circumstances also described in the Feinberg Agreement.  Mr. Feinberg is the trustee of The Feinberg Family Trust and holds voting and dispositive power over the shares held by The Feinberg Family Trust, which is a 10% beneficial owner of our common stock.  The Company valued the RSU at $570,000 or $5.70 per share. During the three months ended March 31, 2014, the Company recorded stock based consulting of $71,250. The remaining balance which is included in prepaid expenses at March 31, 2014 and December 31, 2013 amounted to $461,542 and $532,792, respectively, and will be amortized over the remaining term of the agreement.