9. STOCKHOLDERS EQUITY

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

STOCKHOLDERS EQUITY

Preferred Stock

There are currently 5,000,000 shares of Series A Preferred Stock authorized, with no shares of Series A Preferred Stock issued or outstanding as of December 31, 2015 and 2014.

Effective June 24, 2010, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series B Convertible Redeemable Preferred Stock (the “Certificate”) with the Texas Secretary of State, designating 7,500 shares of Series B Preferred Stock, par value $10.00 per share (the “Series B Shares”). The Series B Shares rank senior to shares of all other common and preferred stock with respect to dividends, distributions, and payments upon dissolution.  Each of the Series B Shares is convertible at the option of the holder into shares of common stock as provided in the Certificate.  There were no Series B Shares issued or outstanding as of December 31, 2015 and 2014.

On October 11, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series C Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 100,000 shares of Series C Preferred Stock, par value $10.00.  The Series C Preferred Stock is entitled to accruing dividends (payable, at the Company’s options, in either cash or stock) of 5% per annum until October 10, 2016, and 3% per annum until October 10, 2018. The Series C Preferred Stock is senior to the Company’s common stock and any other currently issued series of the Company’s preferred stock upon liquidation, and is entitled to a liquidation preference per share equal to the original issuance price of such shares of Series C Preferred Stock together with the amount of all accrued but unpaid dividends thereon.  Each of the Series C Shares is convertible at the option of the holder into 1,000 shares of common stock as provided in the Certificate.  Additionally, each holder of Series C Preferred Stock shall be entitled to vote on all matters submitted for a vote of the holders of Common Stock a number of votes equal to the number of full shares of Common Stock into which such holder’s Series C shares could then be converted. As of December 31, 2015 and December 31, 2014 there were 80,218 and 70,411 shares of Series C Preferred Stock issued and outstanding, respectively.

On November 13, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series D Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 25,000 shares of Series D Preferred Stock. Shares of Series D Preferred Stock are not entitled to any preference with respect to dividend or upon liquidation, and will automatically convert (at a ratio of 1,000-to-1) into shares of the Company’s common stock, par value $0.001 upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. As of December 31, 2015 and December 31, 2014 there were 0 shares of Series D Preferred Stock issued and outstanding. On September 3, 2014, the company increased its authorized common stock to 250,000,000 shares. As a result, all outstanding Series D preferred shares were converted to common stock.

On May 30, 2014, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series E Convertible Preferred Stock (The “Certificate of Designations”), under which it designated 5,000 shares of Series E Preferred Stock.  Shares of Series E Preferred Stock are not entitled to any preference with respect to dividends or upon liquidation, and will automatically convert (at a ratio of 1,000 shares of Common Stock for every one share of Series E Preferred Stock) into shares of the Company’s common stock, $0.001 par value upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. As of December 31, 2015 there were no shares of Series E Preferred Stock issued and outstanding.

During the year ended December 31, 2014, the Company issued an aggregate of 32,179 shares of Series C preferred stock for cash proceeds of $2,252,510.

During the year ended December 31, 2015, the company issued 11,310 shares of Series C preferred stock for cash proceeds of $750,000.

The Series C preferred stock earned dividends of $268,772 and $233,792 for the years ended December 31, 2015 and December 31, 2014, respectively. As of the date of this filing, no Series C preferred stock dividends have been declared or paid.

During the year ended December 31, 2013, the Company granted an aggregate of 15,000 shares of Series D preferred stock to employees and nonemployees for services. 13,000 of the shares were granted to employees and vest immediately upon grant, 1,000 of the shares were granted to an employee and vest in equal tranches over three years through October 1, 2016 and 1,000 of the shares were granted to a nonemployee and vest in equal tranches over three years through September 15, 2016. The aggregate fair value of the awards was determined to be $1,046,669 of which $925,787 was previously recognized, $79,318 was recognized during the year ended December 31, 2014, $6,628 less net forfeitures of $19,173 was recognized during the year ended December 31, 2015, and. $15,764 will be recognized over the remaining vesting periods.

In February of 2014, the Company issued 350 shares of Series D preferred stock to a nonemployee for services rendered.  The shares vest immediately and were recorded at their fair value of $42,000

In July of 2014, the Company issued 750 shares of Series D preferred stock valued at $75,000 to a nonemployee for services rendered.  The shares vest immediately and were recorded at their fair value of $75,000.

In September, 2014 the Company granted 556 shares of Series D preferred stock valued at $50,040 to a contractor according to the terms of his service agreement. In December, 2014, the contractor returned 111 shares of Series D preferred stock in exchange for cash amount of $9,990.

During the year ended December 31, 2014, the Company granted an aggregate of 1,000 shares of Series D preferred stock to two employees according to the terms of their employment agreements. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $120,000. During the year ended December 31, 2015 and 2014, $25,193 and $65,178 was expensed, respectively, and $9,671 remains to be expensed over the remaining vesting period.

On September 3, 2014, the Company increased its authorized common stock to 250,000,000 shares. Accordingly, the 16,545 outstanding shares of Series D preferred stock were automatically converted into 16,545,000 common shares.

The Company evaluated the Series C and Series D preferred stock under FASB ASC 815 and determined that they do not qualify as derivative liabilities. The Company then evaluated the Series C and Series D preferred stock for beneficial conversion features under FASB ASC 470-30 and determined that none existed.

On May 28, 2015, the Company issued 4,166 shares of Series C preferred stock in exchange for cash amount of $250,000.

On September, 14, 2015, the Company issued 3,572 shares of Series C preferred stock in exchange for cash amount of $250,000.

On December, 14, 2015, the Company issued 3,572 shares of Series C preferred stock in exchange for cash amount of $250,000.

Common Stock

On September 3, 2014, the Company held its annual meeting of stockholders.  The stockholders approved an amendment to the Company’s Articles of Incorporation to increase the authorized shares of common stock of the Company from 100,000,000 to 250,000,000.

In January of 2014, the Company issued 1,087,762 common shares for the conversion of notes payable and accrued interest in the amounts of $90,000 and $3,728, respectively.

During the year ended December 31, 2014, the Company issued 500,000 shares of common stock valued at $60,000 to company directors and 1,650,000 shares of common stock for services valued at $162,550.

On March 5, 2015, the Company issued 100,000 shares of common stock which vested immediately valued at $5,970 according to the terms of a service agreement. Under the award, the nonemployee was also granted an aggregate of 800,000 additional shares which vest in tranches of 300,000, 250,000 and 250,000 upon the achievement of certain revenue targets. No expense was recognized for these additional shares during the year ended December 31, 2015.

On March 10, 2015, the Company issued 374,264 shares of common stock in conversion of 357 shares of Series C Preferred stock and $1,036 of related dividends.

On May 19, 2015, the Company issued 100,000 shares of common stock which vested immediately valued at $10,000 according to the terms of a service agreement.

On May 19, 2015, the Company issued 250,000 shares of common stock which vested immediately valued at $23,000 according to the terms of an employment agreement.

On June 19, 2015, the Company issued 642,330 shares of common stock in conversion of 600 shares of Series C Preferred stock and $2,963 of related Series C dividends.

On July 15, 2015, the Company issued 100,000 shares of common stock which vested 60 days after their grant date of May 15, 2015 valued at $9,800 according to the terms of a service agreement.

On December 31, 2015, the Company issued 594,168 shares of common stock in conversion of 546 shares of Series C Preferred stock and $3,372 of related Series C dividends.

During the year ended December 31, 2015, an aggregate of 333,334 common shares were issued upon the vesting of previously granted stock awards and the Company recorded a net reversal of $4,187 of stock-based compensation related to the amortization of stock awards to employees and nonemployees net of reversal of the unvested portion of forfeited awards.

During the year ended December 31, 2015, an aggregate of 666,600 shares of fully vested common stock under previously issued under stock awards and was returned and cancelled. The share cancellation was recognized at par value.

Warrants

At December 31, 2015, there were 9,736,844 warrants outstanding with a weighted average exercise price of $0.19.

A summary of the status of the warrants granted at December 31, 2015 and 2014 and changes during the years then ended is presented below:

For the Year Ended December 31, 2014
	Shares			Weighted Average Exercise Price
Outstanding at beginning of period		15,670,143		$	0.37
Granted		-			-
Exercised		-			-
Forfeited		-			-
Expired		(4,733,299			0.68
Outstanding at end of period		10,936,844		$	0.23
For the Year Ended December 31, 2015
	Shares			Weighted Average Exercise Price
Outstanding at beginning of period		10,936,844		$	0.23
Granted		-			-
Exercised		-			-
Forfeited		(800,000	)		0.75
Expired		(400,000	)		0.49
Outstanding at end of period		9,736,844		$	0.19

The following table summarizes the outstanding warrants as of December 31, 2015:

		As of December 31, 2015						As of December 31, 2015
		Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices		Number Outstanding		Weighted-Average Remaining Contract Life		Weighted- Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$	0.06		4,500,000		2.8	$	0.06		4,500,000	$	0.06
	0.08		550,000		2.2		0.08		550,000		0.08
	0.09		625,000		2.3		0.09		625,000		0.09
	0.15		1,571,300		1.6		0.15		1,571,300		0.15
	0.44		1,515,544		0.6		0.44		1,515,544		0.44
	0.60		975,000		0.7		0.60		975,000		0.60
$	0.06-0.60		9,736,844		2.0	$	0.23		9,736,844	$	0.19

The following table summarizes the outstanding warrants as of December 31, 2014:

		As of December 31, 2014						As of December 31, 2014
		Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices		Number Outstanding		Weighted-Average Remaining Contract Life		Weighted- Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$	0.06		4,500,000		3.8	$	0.06		4,500,000	$	0.06
	0.08		550,000		3.2		0.08		550,000		0.08
	0.09		625,000		3.3		0.09		625,000		0.09
	0.15		1,571,300		2.6		0.15		1,571,300		0.15
	0.25		120,000		0.8		0.25		120,000		0.25
	0.40		3,000,000		0.6		0.40		300,000		0.40
	0.44		1,515,544		1.6		0.44		1,515,544		0.44
	0.50		370,000		1.3		0.50		370,000		0.50
	0.60		975,000		1.7		0.60		975,000		0.60
	0.75		120,000		0.8		0.75		120,000		0.75
	1.00		290,000		1.4		1.00		290,000		1.00
$	0.06-1.00		10,936,844		2.8	$	0.23		10,936,844	$	0.23

Stock Options

A summary of the status of the stock options granted for the years ended December 31, 2015 and 2014, and changes during the period then ended is presented below:

For the Year Ended December 31, 2015
	Options		Weighted Average Exercise Price
Outstanding at beginning of period		943,500	$	0.15
Granted		150,000		(a)
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at end of period		1,093,500	$	0.15

(a)   On January 1, 2015, the company granted three tranches of options, 25,000, 25,000, and 100,000 which vest upon meeting specific performance measures agreed upon. The measures include achieving three specific sales targets per month for 3 consecutive months. The exercise price and expiration date of each tranche will be set upon achieving the targets. As of the date of this filing the performance measures have not been met. As a result the exercise price is undetermined and these options are excluded from the calculation of weighted average remaining life.

For the Year Ended December 31, 2014
	Options		Weighted Average Exercise Price
Outstanding at beginning of period		943,500	$	0.15
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at end of period		943,500	$	0.15

The following table summarizes the outstanding options as of December 31, 2015:

		As of December 31, 2015						As of December 31, 2015
		Stock Options Outstanding						Stock Options Exercisable
Exercise Price		Number Outstanding		Weighted-Average Remaining Contract Life		Weighted- Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$	0.15		953,500		1.63		0.15		943,500	$	0.15
(a)			150,000		-		-		-		-
$	0.15		1.093,500		1.63		0.15		943,500	$	0.15

The following table summarizes the outstanding options as of December 31, 2014:

		As of December 31, 2014						As of December 31, 2014
		Stock Options Outstanding						Stock Options Exercisable
Exercise Price		Number Outstanding		Weighted-Average Remaining Contract Life		Weighted- Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$	0.15		943,500		2.63		0.15		943,500	$	0.15

(a)   On January 1, 2015, the company granted three tranches of options, 25,000, 25,000, and 100,000 which vest upon meeting specific performance measures agreed upon. The measures include achieving three specific sales targets per month for 3 consecutive months. The exercise price and expiration date of each tranche will be set upon achieving the targets. As of the date of this filing the performance measures have not been met. As a result the exercise price is undetermined and these options are excluded from the calculation of weighted average remaining life.