Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS' DEFICIENCY

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STOCKHOLDERS' DEFICIENCY
 3 Months Ended
Mar. 31, 2014
STOCKHOLDERS' DEFICIENCY  
STOCKHOLDERS' DEFICIENCY

NOTE 7 - STOCKHOLDERS’ DEFICIT

 

                Stock Issuances

 

During the three months ended March 31, 2014, the Company received proceeds of $100,000 from the issuance of 500,000 shares of common stock and $184,250 from the exercise of 1,650,000 common stock warrants.

 

Board of Directors fees

 

As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 50,000 shares of common stock to Philip M. Rice (CFO and a Director) in January, 2013, at an exercise price of $.12 per share.  The warrants have a term of three years and vested or will vest as follows: 12,500 vested on the grant date and the remaining 37,500 shall vest quarterly (12,500 per quarter).  The warrants were valued at $10,381 using the Black Scholes pricing model relying on the following assumptions: volatility 131.97%; annual rate of dividends 0%; discount rate 0.27%.  In addition, Mr. Rice received $10,000 for each annual term served, paid in cash quarterly.

 

As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 50,000 shares of common stock to Thomas K. Cox in June, 2013, at an exercise price of $.40 per share.  The warrants have a term of three years and vested or will vest as follows: 12,500 vested on the grant date and the remaining 37,500 shall vest quarterly (12,500 per quarter).  The warrants were valued at $15,873 using the Black Scholes pricing model relying on the following assumptions: volatility 145.67%; annual rate of dividends 0%; discount rate 0.25%.  In addition, Mr. Cox receives $10,000 for each annual term served, paid in cash quarterly.

 

As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 50,000 shares of common stock to John B. Payne in July, 2013, at an exercise price of $.38 per share.  The warrants have a term of three years and vested or will vest as follows: 12,500 vested on the grant date and the remaining 37,500 shall vest quarterly (12,500 per quarter).  The warrants were valued at $17,187 using the Black Scholes pricing model relying on the following assumptions: volatility 143.37%; annual rate of dividends 0%; discount rate 0.25%.  In addition, Mr. Payne receives $10,000 for each annual term served, paid in cash quarterly.

 

As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 50,000 shares of common stock to John Gorman in November, 2013, at an exercise price of $.36 per share.  The warrants have a term of three years and vested or will vest as follows: 12,500 vested on the grant date and the remaining 37,500 shall vest quarterly (12,500 per quarter).  The warrants were valued at $14,053 using the Black Scholes pricing model relying on the following assumptions: volatility 141.53%; annual rate of dividends 0%; discount rate 0.33%.  In addition, Mr. Gorman receives $10,000 for each annual term served, paid in cash quarterly.

 

The company recorded Directors Fees of $74,401 during the twelve months ended December 31, 2013, representing the fees expensed and the value of the vested warrants described above.

 

As compensation for serving as a member of the board of directors, the Company granted warrants to purchase 50,000 shares of common stock to Philip M. Rice (CFO and a Director) in January, 2014, at an exercise price of $.38 per share.  The warrants have a term of three years and vested or will vest as follows: 12,500 vested on the grant date and the remaining 37,500 shall vest quarterly (12,500 per quarter).  The warrants were valued at $13,460 using the Black Scholes pricing model relying on the following assumptions: volatility 121.33%; annual rate of dividends 0%; discount rate 0.44%.  In addition, Mr. Rice will receive $10,000 for each annual term served, paid in cash quarterly.

 

The company recorded Directors Fees of $15,144 during the three months ended March 31, 2014, representing the fees expensed and the value of the vested warrants described above.

 

A summary of the status of the Company’s warrants is presented below.

 

 

March 31, 2014

December 31, 2013

 

Number of

Weighted Average

Number of

Weighted Average

 

Warrants

Exercise Price

Warrants

Exercise Price

 

 

 

 

 

Outstanding, beginning of year

16,900,539

                $       0.17

16,365,209

$         0.17

Issued

100,000

                     0.28

4,820,330

0.18

Exercised

(1,650,000)

                     0.13

(2,785,000)

0.16

Expired

         -

 

(1,500,000)

0.32

Outstanding, end of period

15,350,539

               $       0.17

16,900,539

$        0.17

 

 

Warrants outstanding and exercisable by price range as of March 31, 2014 were as follows:

 

 

Outstanding Warrants

Exercisable Warrants

 

 

 

Average

 

 

 

 

 

Weighted

 

 

 

 

 

Remaining

 

 

Weighted

 

 

Contractual

Exercise

 

Average

Range of

Number

Life in Years

Price

Number

Exercise Price

 

 

 

 

 

 

$  0.12

3,439,439

1.66

$  0.12

3,439,439

$  0.12

   0.125

5,502,097

0.88

0.125

5,502,097

      0.125

   0.15

1,300,000

0.69

0.15

1,300,000

    0.15

   0.17

50,000

5.00

0.17

12,500

   0.17

 0.22

477,004

2.37

0.22

477,004

   0.22

 0.25

3,782,000

2.52

0.25

3,782,000

0.25

  0.30

350,000

4.27

0.30

350,000

0.30

  0.33

250,000

4.25

0.33

250,000

0.33

  0.36

50,000

1.59

0.36

25,000

0.36

  0.38

100,000

2.54

0.38

87,500

0.38

  0.40

50,000

2.19

0.40

50,000

0.40

 

 

 

 

 

 

 

15,350,539

1.73

 

15,275,539

$ 0.17