Stockholders' Deficit

12 Months Ended

Dec. 31, 2013

Equity [Abstract]

Stockholders' Deficit

10. Stockholders’ Deficit

Common Stock

On December 31, 2012 the Company agreed to purchase 537,931 shares of common stock held by Arthur Koenig and 1,793,104 shares of common stock held by Ingalls and Snyder Value Partners, LP at a purchase price per share of $0.0008 for total payment of $1,864. The closing price for the Company’s stock on December 27th was $0.08 per share.

For the year ended December 31, 2012, the Company had repurchased a total of 2,331,035 shares of its common stock and applied the constructive retirement method to these shares. The constructive retirement method was applied to these shares as management does not intend to reissue the shares within a reasonable period of time. The aggregate value of the shares reacquired in 2012 was $23,310. This amount has been charged to the common stock account.

Preferred Stock

The Company authorized 1,000,000 shares of preferred stock of which 25,000 shares have been designated as Series A Convertible Preferred Stock, 500,000 shares have been designated as Series D Convertible Preferred Stock, and 800 shares have been designated as Series E Cumulative Convertible Preferred Stock (the “Series E Stock”). In March 2009, the Company designated 200,000 shares as Series F Convertible Preferred Stock (“Series F Stock”). The remaining authorized shares have not been designated.

Convertible Preferred Stock

In 2009 the Company issued a total of 196,000 shares of Series F convertible preferred stock to Mr. Gipson and received gross proceeds of $4,900,000. On June 1, 2011 the Company issued to Mr. Gipson 4,600,000 shares of its common stock in exchange for the conversion by Mr. Gipson of 184,000 shares of the Company’s Series F Convertible, Redeemable Preferred Stock (“Series F Stock”). Each share of the Series F Stock was converted into 25 shares of common stock pursuant to the conversion terms of the Series F Stock contained in the Certificate of Designation for the Series F Stock. The cumulative accrued interest at the date of conversion of $640,874 was reclassified to additional paid-in capital since the shares were no longer redeemable. As of December 31, 2013 there remained 12,000 shares of Series F Stock outstanding and held by Mr. Gipson.

The key terms of the Series F Stock are summarized below:

Dividend: The Series F Stock is entitled to receive any dividend that is paid to holders of our common stock. Any subdivisions, combinations, consolidations or reclassifications to the common stock must also be made accordingly to Series F Stock, respectively.

Liquidation Preference: In the event of our liquidation, dissolution or winding up, before any payments are made to holders of our common stock or any other class or series of our capital stock ranking junior as to liquidation rights to the Series F Stock, the holders of the Series F Stock will be entitled to receive the greater of (i) $25.00 per share (subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) plus any outstanding and unpaid dividends thereon and (ii) such amount per share as would have been payable had each share been converted into common stock. After such payment to the holders of Series F Stock and the holders of shares of any other series of our preferred stock ranking senior to the common stock as to distributions upon liquidation, the remaining our assets will be distributed pro rata to the holders of our common stock.

Voting Rights: Each share of Series F Stock shall entitle its holder to a number of votes equal to the number of shares of our common stock into which such share of Series F Stock is convertible.

Conversion: Each share of Series F Stock is convertible at the option of the holder thereof at any time. Each share of Series F Stock is initially convertible into 25 shares of common stock, subject to adjustment in the event of certain dividends, stock splits or stock combinations affecting the Series F Stock or the common stock, and subject to adjustment on a weighted-average basis in the event of certain issuances by us of securities for a price less than the then-current price at which the Series F Stock converts into common stock.

Redemption: At any time after September 1, 2011, any holder of Series F Stock may elect to have some or all of such shares redeemed by us at a price equal to the aggregate of (i) $25 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), or the Original Issue Price, plus (ii) all declared but unpaid dividends thereon, plus (iii) an amount computed at a rate per annum of 7% of the Original Issue Price from March 19, 2009 until the redemption date. No redemption demand has been made as of December 31, 2013.

Accretion: The terms of the Series F Stock contain provisions that may require redemption in circumstances that are beyond the Company’s control. Therefore, the shares have been recorded, net of issuance costs of approximately $25,000, as convertible, redeemable stock outside of permanent equity. The Series F Stock was recorded at fair value on the date of issuance. For the year ended December 31, 2013, the Company recorded approximately $20,942 in accretion on the outstanding Series F Stock.

Stock Option Plans

The Company can issue both nonqualified and incentive stock options to employees, officers, consultants and scientific advisors of the Company under the Amended and Restated 2005 Stock Incentive Plan (the “2005 Plan”). At December 31, 2009, the 2005 Plan provided for the issuance of options, restricted stock, restricted stock units, stock appreciation rights or other stock-based awards to purchase 3,050,000 shares of the Company’s common stock. The 2005 Plan contains a provision that allows for an annual increase in the number of shares available for issuance under the 2005 Plan on the first day of each of the Company’s fiscal years during the period beginning in fiscal year 2006 and ending on the second day of fiscal year 2014. The annual increase in the number of shares shall be equal to the lowest of 400,000 shares; 4% of the Company’s outstanding shares on the first day of the fiscal year; and an amount determined by the Board of Directors. No adjustment to the 2005 Plan was made on January 1, 2013.

The Company also has outstanding stock options in three other stock option plans, the 1998 Omnibus Plan, the Amended and Restated Omnibus Stock Option Plan and the Amended and Restated 1990 Non-Employee Directors’ Non-Qualified Stock Option Plan. All plans have expired and no future issuance of awards is permissible.

We use the Black-Scholes option-pricing model to calculate the fair value of each option grant on the date of grant. No stock options were granted during the years ended December 31, 2013 and 2012. All stock options outstanding at December 3, 2013 and 2012 were fully vested, therefore no unrecognized stock compensation expense was recorded at either date.

Stock Options

The following table summarizes the options issued and outstanding as of December 31, 2013:

	Shares			Weighted-Average Exercise Price
Outstanding stock options at the beginning of year		3,010,980		$	1.51
Granted		—			—
Exercised		—			—
Forfeited and expired		(8,500	)		5.00
Outstanding and exercisable stock options at year end		3,002,480		$	1.50

The following table summarizes information about the stock options outstanding and exercisable as of December 31, 2013:

Range of Exercise Prices	Number Outstanding		Weighted Average remaining Contractual Life		Weighted Average Exercise Price
$1.15 — $1.36		2,287,500		.4 years	$	1.15
$2.00 — $3.00		539,980		1.7 years		2.33
$3.10 — $4.65		155,000		3.8 years		3.17
$4.99 — $6.96		20,000		.3 years		5.68
		3,002,480		0.8 years	$	1.50

As of December 31, 2013, 809,172 shares were available for grant under the 2005 Plan. As of December 31, 2013, the Company had reserved 3,811,652 shares of common stock to meet its option obligation.