Registration of securities issued in business combination transactions

Warrants

v3.2.0.727
Warrants
 6 Months Ended 12 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Warrants    
Warrants

NOTE 9 – WARRANTS

 

The following is a summary of the Company’s warrant activity:

 

      Warrants     Weighted average exercise price     Weighted average remaining contractual term in years     Aggregate intrinsic value
Outstanding January 1, 2014       3,395,833     $ 0.45       5.28     $ -  
Exercisable January 1, 2014       3,395,833     $ 0.45       5.28     $ -  
Canceled       (3,395,833 )                        
Granted       28,435,782                          
Exercised       -                          
Forfeited       -                          
Outstanding December 31, 2014       28,435,782     $ 0.64       4.07     $ -  
Exercisable December 31, 2014       28,435,782     $ 0.64       4.07     $ -  
Canceled       -                          
Granted       10,364,512                          
Exercised       -                          
Forfeited       -                          
Outstanding June 30, 2015       38,800,294     $ 0.50       3.89     $ 843,820  
Exercisable June 30, 2015       38,800,294     $ 0.50       3.89     $ 843,820  

 

Under ASC No. 718, the Company estimates the fair value of warrants granted on each grant date using the Black-Scholes option valuation model. The fair value of warrants issued with debt is recorded as a debt discount and amortized over the life of the debt. The range of fair value assumptions related to warrants outstanding as of June 30, 2015 and December 31, 2014, were as follows:

 

    June 30, 2015     December 31, 2014  
Dividend yield     0.0 %     0.0 %
Risk-free rate     0.12% - 0.86%       0.12% - 0.66%  
Expected volatility     102% - 159%       112% - 159%  
Expected term     1.0 - 2.5 years       1.0 - 2.5 years  

 

The expected volatility was calculated based on the historical volatilities of publicly traded peer companies, determined by the Company. The risk free interest rate used was based on the U.S. Treasury constant maturity rate in effect at the time of grant for the expected term of the warrants to be valued. The expected dividend yield was zero, as the Company does not anticipate paying a dividend within the relevant time frame. The expected warrant term is the life of the warrant.

 

The Company recognized $4,000 in stock based compensation expense related to warrants for the three and six-months ended June 30, 2015. The Company recognized $11,610 and $5,229,589, in stock based compensation expense related to warrants during the three and six-months ended June 30, 2014, respectively.

NOTE 10 – WARRANTS

 

The following is a summary of the Company’s warrant activity:

 

    Warrants     Weighted
average
exercise price 		    Weighted
average
remaining
contractual
term in years 		    Aggregate
intrinsic value 		 
Outstanding January 1, 2013     3,693,971     $ 0.450       4.81     $ -  
Exercisable January 1, 2013     3,693,971     $ 0.450       4.81     $ -  
Granted     -                          
Exercised     -                          
Forfeited     (298,138 )                        
Outstanding December 31, 2013     3,395,833     $ 0.450       5.28     $ -  
Exercisable December 31, 2013     3,395,833     $ 0.450       5.28     $ -  
Canceled     (3,395,833 )                        
Granted     28,435,782                          
Exercised     -                          
Forfeited     -                          
Outstanding December 31, 2014     28,435,782     $ 0.643       4.07     $ -  
Exercisable December 31, 2014     28,435,782     $ 0.643       4.07     $ -  

 

Under ASC No. 718, the Company estimates the fair value of warrants granted on each grant date using the Black-Scholes option valuation model. The fair value of warrants issued with debt is recorded as a debt discount and amortized over the life of the debt. The range of fair value assumptions related to warrants outstanding as of December 31, 2014 and 2013, were as follows:

 

    December 31, 2014     December 31, 2013  
Dividend yield     0.0 %     0.0 %
Risk-free rate     0.12% - 0.66 %     0.62% - 4.59 %
Expected volatility     112% - 159 %     108% - 167 %
Expected term     1.0 - 2.5 years       2.5 - 10.0 years  

 

The expected volatility was calculated based on the historical volatilities of publicly traded peer companies, determined by the Company. The risk free interest rate used was based on the U.S. Treasury constant maturity rate in effect at the time of grant for the expected term of the warrants to be valued. The expected dividend yield was zero, as the Company does not anticipate paying a dividend within the relevant time frame. The expected warrant term is the life of the warrant.

 

On November 10, 2014, the Company issued a warrant to purchase 30,000 shares of common stock and modified the terms of a warrant to purchase 300,000 shares of common stock. This issuance and modification resulted in additional stock based compensation expense of $20,951.

 

The Company recognized $5,250,540 and $0, in stock based compensation expense related to warrants during the years ended December 31, 2014 and 2013, respectively.

 

Warrants issued prior to February 7, 2014, were issued in conjunction with the origination of notes payable and were accounted for as a discount on the related notes. See Note 6 for the expense associated with the issuance of these warrants.