7. STOCK HOLDERS' EQUITY

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

7. STOCK HOLDERS' EQUITY

The Company has 75,000,000 shares of common stock authorized with a par value of $0.025 and 71,261 shares of Preferred stock with a par value of $0.001.  There were 15,827,811 and 9,963,418 common shares outstanding as of June 30, 2015 and December 31, 2014, respectively.  There were 71,261 of Preferred shares outstanding at June 30, 2015 and December 31, 2014.  There are two classes of Preferred stock, Series A and Series B.

There are 51 shares of Series A Preferred stock issued and outstanding as of June 30, 2015 and December 31, 2014.   Series A stock has no conversion rights, is senior to any other class or series of capital stock of the Company and special voting rights.  Each one (1) share of Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding Common Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y)  0.49, Minus (z) the Numerator.

There are 71,210 shares of Series B Preferred Stock issued and outstanding as of June 30, 2015 and December 31, 2014.  Holders of Series B Preferred stock shall be entitled to receive when, as and if declared by the Board of Directors cumulative dividends at the rate of twelve percent (12%) of the Original Issue Price.  The maximum potential dividend through June 30, 2015 would be $961,335.  In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series B Preferred stock shall be entitled to receive, immediately prior and in preference to any distribution to holders of the Company’s common stock, an amount per share equal to the sum of $100.00 and any accrued and unpaid dividends of the Series B Preferred Stock.  Each share of Series B Preferred Stock may be converted at the option of the holder into the Company’s Common stock.  The shares shall be converted using the “Conversion Formula”: divide the Original Issue Price by 75% of the average closing bid price of the Common Stock for the five (5) consecutive trading days ending on the trading day of the receipt by the Company of the notice of conversion.

During the six months ending June 30, 2015, 5,864,393 shares of common stock were issued. These shares were valued at $1.40 and $1.27 per share dependent upon the date of issuance. The fair value of the shares of common stock were based on the quoted trading price on the date of issuance. 173,550 of these shares were issued to vendors for services generating a professional fees expense of $242,970. 5,690,843 of these shares were issued to officers and employees as incentive compensation resulting in compensation expense of $7,356,180.