STOCKHOLDER'S EQUITY

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

STOCKHOLDER'S EQUITY

NOTE 10 – STOCKHOLDER’S DEFICIT

Common Stock

During the six months ended June 30, 2016, the Company issued 704,074 shares of common stock upon the conversion of principal and interest on convertible debt totaling $21,222.

During the six months ended June 30, 2016, the Company issued 675,000 shares of common stock as consideration for services related to its acquisition of FIN Holdings. The fair value of the shares, totaling $270,000, was estimated based on the publicly quoted trading price and recorded as an expense on the date of the acquisition.

During the six months ended June 30, 2016, the Company issued 1,430,000 shares of common stock as consideration for debt issuance costs. The fair value of the shares, totaling $169,125, was estimated based on publicly quoted trading prices and recorded as debt issuance costs to be amortized into interest expense over the terms of the respective debt agreements.

During the six months ended June 30, 2016, the Company issued 1,033,337 shares of common stock to investors in connection with the April 2016 Convertible notes (see Notes 7) of which $54,470 of the proceeds from the issuance of convertible notes was attributed to the common stock based on their relative fair value to that of the notes and recorded as a debt discount to be amortized into interest expense over the terms of the respective debt agreements.

During the six months ended June 30, 2016, the Company issued 22,500,000 shares of common stock as consideration for the acquisition of FIN. See Note 2.

Warrants

During the six months ended June 30, 2016, in connection with the issuance of debt, the Company issued warrants to acquire 6,408,332 shares of common stock over five-year terms. Warrants to acquire 208,332, and 6,200,000 shares of common stock are exercisable for an exercise price of $0.48 per share and $0.25 per share, respectively.

During the six months ended June 30, 2016, the Company issued warrants to acquire 258,621 shares as partial consideration for the purchase of inventory. The warrants are exercisable at $0.58 per share over a five-year term. The fair value of the warrants, totaling $79,081 and was estimated using the Black Scholes method and the following assumptions: volatility – 81%, Term – 5 Yeas, and Risk Free Rate – 1.57%, The warrants qualified for equity accounting.

The following is a summary of the Company’s warrant activity for the six months ended June 30, 2016:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Life
Outstanding at December 31, 2015		35,171,744	$	0.10	4.1 Years
Granted		6,666,953	$	0.27	4.8 Years
Outstanding at June 30, 2016		41,838,697	$	0.13	4.2 Years

Stock Options

During the six months ended June 30, 2016, the Company granted to employees, options to acquire 3,000,000 shares of common stock, of which 1,000,000 are exercisable at an exercise price of $0.45 per share vesting over two years, 1,000,000 are exercisable at an exercise price of $0.40 per share vesting on the date of grant, 500,000 are exercisable at an exercise price of $0.25 per share with 100,000 exercisable immediately and the balance vesting over two years, and 500,000 are exercisable at an exercise price of $0.10 per share vesting over two years. The options have a 5 year term. The Company determined the grant date fair value of the options granted during the six months ended June 30, 2016 using the Black Scholes Method and the following assumptions:

Expected Volatility – 80.0% to 93.0%

Expected Term – 2.5 – 3.1 Years

Risk Free Rate – 0.98%

Dividend Rate – 0.00%

Activity related to stock options for the six months ended June 30, 2016 is summarized as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Term (Yrs)		Aggregate Intrinsic Value
Outstanding as of December 31, 2015		47,800,000	$	0.32		4.24	$	924,650
Granted		3,000,000	$	0.34		5.41	$	25,000
Outstanding as of June 30, 2016		50,800,000	$	0.32		4.31	$	949,650
Exercisable as of June 30, 2016		40,016,667	$	0.37		4.27	$	493,575

The following table summarizes stock option information as of June 30, 2016:

Exercise Prices		Outstanding		Weighted Average Contractual Life	Exercisable
$	0.0001		3,500,000	4.25 Years		1,750,000
$	0.10		8,500,000	4.22 Years		4,625,000
$	0.15		6,300,000	4.25 Years		2,416,666
$	0.25		500,000	9.76 Years		100,000
$	0.40		1,000,000	4.67 Years		1,000,000
$	0.45		31,000,000	4.25 Years		30,125,000
	Total		50,800,000	4.31 Years		40,016,667

As discussed in Note 13, the term of all the options was extended to ten years in August 2016 from their original grant date and therefore the remaining contractual term in the table above would all increase to 9.25 years.

During the six months ended June 30, 2016, the Company recognized approximately $6,152,000 of stock-based compensation expense. As of June 30, 2016, there was approximately $2,357,000 of unrecognized compensation costs related to stock options outstanding which is expected to be recognized through 2019.