14. Settlement with Former Officer
|12 Months Ended|
Dec. 31, 2015
|Settlement With Former Officer|
|Settlement with Former Officer||
On November 15, 2013, Cecil Kyte voluntarily resigned as a Director, Chairman of the Board, a member of the Nominating and Corporate Governance Committee, and Chief Executive Officer. Pursuant to his separation agreement, the Company recognized expense of $364,315 to account for his severance pay plus corresponding payroll taxes which was recorded as part of Operating Expenses in the accompanying consolidated Statement of Operations for 2013. The entire amount due to Mr. Kyte was paid in full in 2014.
At the time of separation, Mr. Kyte also held unvested options which had been granted in January 2011 to purchase 10,560,000 shares of common stock at $0.25 per share, of which 3,520,000 shares were due to vest in January 2014 and 7,040,000 shares were due to fully vest by January 2016. Under terms of the separation agreement, the Company accelerated the vesting of the 3,520,000 options to November 15, 2013 while the remaining 7,040,000 options were forfeited. As a result, the Company recognized compensation expense of $3,809,325, to account for the fair value of the options that were modified. The fair value was determined using a Black-Scholes Option Pricing model with the following: risk-free interest rate of 2.06%; dividend yield of 0%; volatility of 130%; and an expected life of 7 years. Previously recorded compensation recorded in 2013 related to the original vesting schedule of the 3,520,000 options was reversed, and the $3,809,325 was recorded as part of Operating Expenses in the accompanying consolidated Statement of Operations for 2013.