10. Subsequent Events
|3 Months Ended|
Mar. 31, 2017
|Subsequent Events [Abstract]|
Grant of Stock Options
In May through April 2017, the Company appointed four new members to the Board of Directors and appointed a new Chairman of the Audit Committee. Upon these appointments, in accordance with the Company’s Board of Directors compensation policy, the Company granted stock options to purchase a total of 1,839,285 shares of common stock. The stock options vest monthly through December 31, 2017, are exercisable at $0.07 to $0.13 per share and will expire 10 years from the date of issuance. Total fair value of the stock options amounted to $138,000 which will be expensed over the vesting period.
On March 31, 2017, the Company executed employment agreements effective April 1, 2017 with two officers of the Company. The agreements are for a period of two years and will require payment of salary in the aggregate of $308,000 per year. In addition, the Company also granted these two officers stock options to purchase a total of 3,250,000 shares of common stock. The stock options vest over a two-year period, exercisable at a price range of $0.07 through $0.40 per share and will expire in 10 years. Total fair value of the stock options amounted to $173,000 which will be expensed over the vesting period.
In May 2017, two members of the Company’s Board of Directors resigned effective May 8, 2017. In lieu of cash payment for unpaid Directors and Committee fees payable to the Directors of $82,000, the Company immediately vested the stocks option granted to them in January 2017 to purchase in aggregate of 2,000,000 shares of common stock at $0.05 per share with an estimated fair value of $152,000 at the date of modification.
Issuance of Convertible Notes
From April 1, 2017 up to May 12, 2017, the Company issued convertible notes in aggregate of $662,000 in exchange for cash of $602,000. The notes are unsecured, convertible into 13.2 million shares in common stock of the Company at a conversion price of $0.05 per share and mature in one year. In connection with these notes, the Company also issued warrants to purchase 6.6 million shares of common stock of the Company at an exercise price of $0.05 per share and expiring one year from the date of issuance. As a result, the Company will record a note discount of $635,000 to account for the relative fair value of the warrants, the notes’ beneficial conversion feature and original issue discount which will be amortized as interest expense over the life of the notes.
Conversion of Convertible Notes
From April 1, 2017 up to May 12, 2017, Company issued 3,413,540 shares of common stock upon conversion of previously issued convertible notes in aggregate value of $171,000.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://www.xbrl.org/2003/role/presentationRef