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13. SUBSEQUENT EVENTS
9 Months Ended
Sep. 30, 2016
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

Subsequent to September 30, 2016, pursuant to a private placement, the Company issued to two shareholders a total of 2,333,333 shares of common stock for cash with a per share price of $0.15 per share or $350,000. Further, related to this investment, the Company is obligated to issue 100,000 warrants as an offering cost to a third party, each with a 5 year term and a strike price of $0.15 per share, at the close of the private placement offering. 

 

Effective July 2016, the Company entered into an investor relations consulting agreement with LP Funding, LLC whereby the consultant will provide various investor recognition services to the Company. The agreement calls for two payments of 500,000 shares of the Company’s common stock for each payment, with a per share value of $0.15 (based on contemporaneous cash sales prices) or a total of $150,000. The payments are contractually defined to be earned on a specific day and will be expensed over the term of the term of the agreement. Subsequent to September 30, 2016, the Company released the second tranche of 500,000 shares of common stock valued at $75,000 under this agreement (See Note 10).

 

On October 18, 2016, the Company entered into a five-year employment agreement, effective as of January 1, 2016, with Mr. Desmond Wheatley, the Chief Executive Officer and President of the Company (the “Agreement”). Pursuant to the Agreement, Mr. Wheatley will receive an annual salary of $250,000 per annum, which will be paid (i) in twenty-four installments of $8,333 each on the fifteenth and last day of each month and (ii) twenty-four installments of $2,083, on the same dates, which Mr. Wheatley will defer until such time as Mr. Wheatley and the Board of Directors agree that payment of the deferred salary and/or cessation of the deferral is appropriate. In certain circumstances upon the Company achieving specified milestones, which are described in the Agreement, Mr. Wheatley can demand payment of all or any portion of the deferred amount, and the Company must comply with such demand. All deferred amounts will be evidenced by an unsecured convertible promissory note payable by the Company to Mr. Wheatley, bearing simple interest at the rate of 10% per annum, accruing until paid, convertible into shares of the Company’s common stock at $0.15 per share (subject to appropriate adjustment in the event of stock dividends, stock splits, recapitalizations, and similar extraordinary transactions) at any time in whole or in part at Mr. Wheatley’s discretion, with a maturity date of December 31, 2020. Additionally, pursuant to the Agreement, on October 18, 2016, Mr. Wheatley was granted 4,350,000 stock options to purchase 4,350,000 shares of the Company’s common stock pursuant to the Company’s 2011 Stock Incentive Plan, exercisable at an exercise price of $0.15 per share for a period of ten years from the date of grant, vesting as follows: 1,450,000 on October 18, 2016, 1,450,000 on January 1, 2017, and 1,450,000 on January 1 2018. These options are valued at $513,862 using the Black-Scholes option pricing methodology.  The assumptions used in the valuation of these options include volatility of 105.15%, expected dividends of 0.0%, a discount rate of 0.16%, and expected terms, applying the simplified method, of 5.6 years.