Stockholders' Deficiency

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

6. Stockholders' Deficiency

Preferred Stock

As of March 31, 2015 and December 31, 2014, the Company had accrued contractual dividends of $79,961 and $298,918, respectively, related to the Series B Preferred Stock. On January 1, 2015 and 2014, the Company issued 31,633 and 29,564 shares of Series B convertible preferred stock valued at approximately $299,000 and $279,000, respectively, representing approximately $0.66 in value per share of Series B Preferred Stock outstanding on each date, to the Series B convertible preferred stock owners as payment in kind for dividends.

Stock Options

Stock-based compensation expense related to stock options was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $78,789 and $151,853 for the three months ended March 31, 2015 and 2014, respectively.

As of March 31, 2015, stock-based compensation expense related to stock options of $1,060,043 remains unamortized, including $168,474 which is being amortized over the weighted average remaining period of 1.0 years. The remaining $891,569 is related to a performance based option where vesting is currently deemed to be improbable and no amount is being amortized.

Warrants

Valuation

In applying the Black-Scholes option pricing model to stock warrants, the Company used the following weighted average assumptions:

	For The Three Months Ended
	March 31,
	2015			2014
Risk free interest rate		1.50	%		1.74	%
Dividend yield		0.00	%		0.00	%
Expected volatility		196.0	%		171.0	%
Expected life in years		5.00			5.00

Grants

The weighted average fair value of the stock warrants granted during the three months ended March 31, 2015 and 2014, was $0.08 and $0.23 per share, respectively.

Stock-based compensation expense related to warrants for the three months ended March 31, 2015 and 2014 was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $216 and $264, respectively. As of March 31, 2015, stock-based compensation expense related to warrants of $577,307 remains unamortized, including $467 which is being amortized over the weighted average remaining period of 0.5 years. The remaining $576,840 is related to a performance based warrant where vesting is currently deemed to be improbable and no amount is being amortized.

A summary of the stock warrant activity during the three months ended March 31, 2015 is presented below:

			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Life		Intrinsic
	Warrants		Price		In Years		Value
Outstanding, January 1, 2015		9,339,044	$	0.45
Granted		500,000	$	0.10
Exercised		-	$	-
Forfeited		-		-
Outstanding, March 31, 2015		9,839,044	$	0.44		4.0	$	-
Exercisable, March 31, 2015		9,579,044	$	0.37		4.1	$	-

The following table presents information related to stock warrants at March 31, 2015:

	Warrants Outstanding				Warrants Exercisable
	Weighted				Weighted		Weighted
Range of	Average		Outstanding		Average		Average		Exercisable
Exercise	Exercise		Number of		Exercise		Remaining Life		Number of
Price	Price		Warrants		Price		In Years		Warrants
$0.10 - $0.35	$	0.27		9,246,198	$	0.27		4.2		9,246,198
$0.36 - $3.00		2.91		562,846		2.91		1.4		312,846
$3.01 - $4.95		4.95		30,000		4.95		2.5		20,000
$0.10 - $4.95	$	0.44		9,839,044	$	0.37		4.1		9,579,044