STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2014

Stockholders' Equity Note [Abstract]

NOTE 9 – STOCKHOLDERS’ EQUITY

Common Stock

The Company is authorized to issue 500,000,000 shares of its $0.001 par value common stock.

During the year ended December 31, 2014 and 2013, the Company issued 1,272,005 and 1,933,886 shares of the Company’s common stock for consulting services, with a value of $314,005 and $407,143, respectively, based on the fair market value of the Company’s common stock on the date of grant.

During the year ended December 31, 2014 and 2013, the Company issued 226,996 and 638,463 shares of the Company’s common stock for software development services, with a value of $47,444 and $133,908, respectively, based on the fair market value of the Company’s common stock on the date of grant

During the year ended December 31, 2014 and 2013, the Company issued 0 and 898,200 shares of the Company’s common stock with a value of $0 and $186,736, respectively, for the settlement of accounts payable. In connection with the issuance of stock in 2013, a gain on settlement was recorded in the statement of operations for $4,735.

Preferred Stock

The Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.001 per share. The preferred stock may be issued in one or more series.

The first series consists of 3,210,000 shares and is designated as series A convertible preferred stock (“Series A Preferred Stock”). The holders of Series A Preferred Stock are entitled to receive, if, when and as declared by the Board, dividends at an annual rate of 8% of the original purchase price of Series A Preferred Stock. No dividends were declared for the years ended December 31 2014 and 2013. In the event of any liquidation, dissolution or winding up of the Company, voluntary or involuntary, the holders of the Series A Preferred Stock are entitled to receive the amount of $0.50 per share. Each share of Series A Preferred Stock is convertible at the option of the holder at any time after the date of issuance into equal number of shares of common stock. Each share of Series A Preferred Stock issued and outstanding is entitled to the number of votes equal to the number of shares of common stock into which such share of Series A Preferred Stock could be converted.

In August and October 2013, the Company obtained the consent of approximately 69% of its preferred shareholders to adopt, approve and ratify the Amended and Restated Certificate of Designations of the Company’s Series A Convertible Preferred Stock. The amendment, which was filed with the state of Nevada on October 4, 2013, provides that the Company shall have the right to convert the Series A Convertible Preferred Stock into shares of the Company’s common stock in its sole discretion at any time, at which time, such Series A Convertible Preferred Stock shall automatically and without any required action by any holder, be converted into 103% of fully paid, non-assessable shares of common stock. As of the date when these financial statements were available to be issued, no preferred shares had been converted to common stock.

On March 26, 2014 the Company designated 2,000,000 shares of preferred stock as Series B Preferred Stock (“Series B Preferred Stock”). Each share of Series B Preferred Stock is entitled to the equivalent of one hundred (100) votes of Common Stock. The holders of Series B Preferred Stock are not entitled to dividends and do not receive liquidation preferences or conversion privileges.

On March 26, 2014, the Company issued to its officers 2,000,000 shares of preferred stock designated as series B Preferred Stock. The fair value of the Series B Preferred Stock on the date of issuance was determined to be $2,000 and was recorded as officers’ compensation.

During the year ended December 31, 2012, the Company issued 26.75 units of Series A Preferred Stock at $30,000 per unit. Each unit consists of (1) 120,000 shares of Series A Preferred Stock, and (2) warrants to purchase 120,000 shares of Company’s common stock at an exercise price of $0.50 with immediate vesting and 5 years to exercise. Total consideration from issuance of units amounted to $802,500, of which $152,500 was received in January 2013. The Company issued warrants to purchase 3,210,000 shares of the Company’s common stock in conjunction with the sale of units and the fair value of the warrants was determined to be $135,141.

In connection with the Company’s December 31, 2012 sale of $802,500 in units consisting of an aggregate of 3,210,000 shares of the Company’s Series A Preferred Stock and warrants to purchase an aggregate of 3,210,000 shares of the Company’s common stock, the Company was required to file a registration statement registering the shares of common stock. Such Series A Preferred Stock were convertible into 3,210,000 shares of common stock. Such registration statement was required to be filed within 60 days of the final closing date (the “Filing Date”) and to be declared effective by 150 days from the Filing Date. The Company did not meet the required Filing Date and the required effectiveness date has already passed. Pursuant to the registration rights agreement, if the registration statement was not filed on a timely basis or was not declared effective by the SEC for any reason on a timely basis, the Company was required to pay each investor monthly liquidated damages equal to 1.0% of the investment amount subscribed for by such investor (capped at 12%) until the registration statement is filed or declared effective, as the case may be. The Company’s registration statement was declared effective by the SEC on February 14, 2014. At December 31, 2014 and 2013, the Company accrued $47,000 of estimated liquidated damages that it owes to the holders of the outstanding Series A Preferred Stock.

Private Placements

In 2014, the Company raised $3,396,000 under a private placement which consisted of a unit made up of one (1) share of common stock and one (1) warrant with a term of five years and an exercise price of $0.50. Each unit was sold for $0.25. Accordingly, the Company issued 13,584,000 shares of common stock and a like amount of warrants. The warrants were valued at $546,733 using the Black-Scholes pricing model using the following range of inputs:

Risk-free interest rate	0.49 0.73	%
Expected dividend yield	0	%
Expected lives	2.5 years
Expected volatility	70	%

In the third quarter of 2014, the Company opened a new private placement for the sale of common stock at $0.40 per share. The Company sold 62,500 shares of the Company’s common stock for $25,000.

During the year ended December 31, 2013, the Company raised $1,944,125 in a private placement for the issuance of units consisting of shares of common stock and warrants to purchase common stock. Each unit was sold for $0.25. Accordingly, the Company issued 7,776,500 shares of common stock and a like amount of warrants that vested immediately, had a term of five years, and an exercise price of $0.50. The warrants were valued at $322,317 using the Black-Scholes option pricing model.

Stock Options

During 2010, the Board of Directors approved and adopted the 2010 Stock Option, Deferred Stock and Restricted Stock Plan (the “Plan”) to provide for the issuance of non-qualified and/or incentive stock options to employees, officers, directors and consultants and other service providers. The Plan was subsequently amended on various dates. Generally, all options granted expire five to ten years from the date of grant. It is the policy of the Company to issue new shares for stock options exercised, rather than issue treasury shares. Effective July 1, 2012, the total number of shares of common stock reserved for issuance was reduced to 15,000,000 shares, subject to annual increases of up to an amount equal to 15% of the outstanding fully-diluted shares of common stock of the Company and any such increase cannot be made until the fully-diluted shares of common stock outstanding exceeds 100,000,000 shares.

During 2014, the Company granted 5,978,000 options to various employees. Each option had a life of five years, had exercise prices ranging from $0.10 to $0.40 and had vesting dates ranging from 2 to 3 years. The Company valued the options using the Black-Scholes pricing model on the date of grant using the following range of inputs.

	For the year ended December 31, 2014
Risk-free interest rate		0.11 – 0.14	%
Expected dividend yield		0	%
Expected lives		3.5- 4.0 years
Expected volatility		70-100	%

The total value of the options was issued during 2014 was $609,577 which will be recognized over the next three years as they vest.

The Company did not grant any stock options during the year ended December 31, 2013.

The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company's employee stock options.

The expected term of employee stock options is calculated using the simplified method which takes into consideration the contractual and vesting terms of the options.

The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public company's common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that the Company’s common stock has enough market history to use historical volatility.

The dividend yield assumption for options granted is based on the Company's history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future

A summary of the Company’s stock options activity and related information is as follows:

				Weighted Average		Weighted Average Remaining Contractual
	Options			Price		Term		Exercisable
Outstanding at December 31, 2012		17,100,000		$	0.034		7.33		7,800,000
Granted		-			-		-
Exercised		-			-		-		-
Expired/Cancelled		-			-		-		-
Outstanding at December 31, 2013		17,100,000		$	0.034		6.33		11,400,000

Granted		5,978,000			0.18		5.00
Exercised		-			-		-		-
Expired/Cancelled		(2,500,000	)		0.10		4.65
Outstanding at December 31, 2014		20,578,000		$	0.05		4.96		16,037,000

As of December 31, 2014, there was $439,379 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over the next 2.75 years as follows: 2015 - $345,592, 2016 - $74,542, 2017 - $19,245

Subsequent to December 31, 2014, 450,000 options were forfeited, reducing future unrecognized compensation cost by approximately $61,000.

The following table sets forth additional information about stock options outstanding at December 31, 2014:

Weighted

Average

Weighted

Range of

Remaining

Average

Exercise

Options

Contractual

Exercise

Options

Prices

Outstanding

Life

Price

Exercisable

$ 0.025 - 0.40

20,578,000

5.13

0.04

16,037,000

The estimated aggregate pretax intrinsic value (the difference between the Company’s estimated stock price on the last day of the period ended December 31, 2014 and the exercise price, multiplied by the number of in-the-money options) is approximately $7,192,500. This amount changes based on the fair market value of the Company’s common stock.

During the years ended December 31, 2014 and 2013, stock based compensation from stock option included in selling general and administrative was $444,955 and $296,100, respectively. There was no stock option expense included in research and development costs.

Warrants

During the year ended December 31, 2013, the Company issued stock purchase warrants to investors in private placements for the right to purchase 7,776,500 shares of the Company’s common stock at $0.50 per share. The warrants vest immediately and have a term of five years from the date the warrants were issued. The warrants were valued at $322,317 using the Black-Scholes option pricing model. See above for related private placement information and valuation of warrants issued in connection therewith.

On March 11, 2013, the Company entered into a Software Development Agreement pursuant to which a warrant to purchase 350,000 shares of the Company’s common stock at $0.25 per share was issued. The warrant has a cashless exercise feature a five (5) year term and vests as follows: (a) 50,000 shares on July 31, 2013, (b) 50,000 shares on October 31, 2013, and (c) 25,000 shares at the end of every three months starting on January 31, 2014. During the fourth quarter of 2014, the agreement was terminated and 175,000 warrants were forfeited. The warrants were valued quarterly based on the vesting requirements using the Black-Scholes pricing model.

On April 1, 2013, the Company entered into a Software Development Agreement pursuant to which a warrant to purchase 800,000 shares of the Company’s common stock at $0.25 per share was issued. The warrant has a cashless exercise feature a five (5) year term and vests as follows: (a) 100,000 shares on July 31, 2013, (b) 100,000 shares on October 31, 2013, and (c) 60,000 shares at the end of every three months starting on January 31, 2014. The warrants were valued quarterly based on the vesting requirements using the Black-Scholes pricing model using the below range of inputs. Subsequent to year end, the agreement was terminated and 300,000 unvested warrants were forfeited.

On April 1, 2013, the Company entered into a Software Development Agreement pursuant to which a warrant to purchase 125,000 shares of the Company’s common stock at $0.25 per share was issued. The warrant has a cashless exercise feature a five (5) year term and vests 12,500 shares at the end of every three months with the first tranche vesting on January 31, 2014. The warrants were valued quarterly based on the vesting requirements using the Black-Scholes pricing model using the below range of inputs. Subsequent to year end, the agreement was terminated and 62,500 unvested warrants were forfeted.

On July 1, 2013, the Company entered into a Software Development Agreement pursuant to which a warrant to purchase 60,000 shares of the Company’s common stock at $0.25 per share was issued. The warrant has a cashless exercise feature a five (5) year term and vests as follows: (a) 10,000 shares on December 31, 2013, and (b) 5,000 shares at the end of every three months starting on April 1, 2014. The warrants were valued quarterly based on the vesting requirements using the Black-Scholes pricing model using the below range of inputs. Subsequent to year end, the agreement was terminated and 35,000 unvested warrants were forfeited.

On August 28, 2013, the Company entered into a Consulting Agreement pursuant to which a warrant to purchase 300,000 shares of the Company’s common stock at $0.25 per share was issued. The warrant has a cashless exercise feature a five (5) year term and vested immediately. The warrants were valued at $23,400 using the Black-Scholes option pricing model.

On August 13, 2013, the Company entered into a Consulting Agreement pursuant to which a warrant to purchase 25,000 shares of the Company’s common stock at $0.25 per share was issued. The warrant has a cashless exercise feature a five (5) year term and vests 6,250 shares at the end of every three months starting December 1, 2013. The warrants were valued quarterly based on the vesting requirements using the Black-Scholes pricing model using the below range of inputs.

On February 1, 2014, the Company entered into a software development agreement pursuant to which it granted a warrant to purchase 125,000 shares of the Company’s common stock at an exercise price of $0.25. The warrant has a five (5) year term and vests over three (3) years as follows (a) 20,000 shares after 6 months (b) remaining at the rate of 10,500 shares at the end of every three months, thereafter. The warrants were valued quarterly based on the vesting requirements using the Black-Scholes pricing model using the below range of inputs. The agreement was terminated in the third quarter of 2014 and accordingly, 105,000 unvested warrants were forfeited.

On July 22, 2014, the Company entered into a consulting agreement pursuant to which it granted warrants to purchase 2,664,000 shares of the Company’s common stock at an exercise price of $0.25. The warrants vested immediately and have a term of 10 years. The fair value of the warrants using the Black-Scholes model was determined to be $402,940 using the below range of inputs. The value of the agreement will be amortized to expense over the three-year term of the agreement. As of December 31, 2014 $59,322 was amortized to selling, general and administrative expense and $134,313 and $209,305 remained unamortized in other current assets and other assets, respectively in the accompanying balance sheets based on the short and long-term portion of the remaining amount.

On August 22, 2014, the Company entered into a marketing agreement pursuant to which it granted a warrant to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.25. The warrant has a term of 10 years and vests over 2 years, beginning in October 2014, as follows: (a) 250,000 upon execution of the agreement (b) remaining at the rate of 125,000 shares at the end of every four months, thereafter. The warrants are valued quarterly based on the vesting requirements using the Black-Scholes pricing model using the below range of inputs.

The assumptions used in the Black-Scholes option pricing model for warrants issued are as follows:

	For the year ended			For the year ended
	December 31, 2014			December 31, 2013
Risk-free interest rate		0.46 - 1.89	%		0.29 - 0.84	%
Expected dividend yield		0	%		0	%
Expected lives		1.75 – 6.0years			2.5 - 3.5 years
Expected volatility		70-100	%		70	%

A summary of the Company’s warrant activity and related information is as follows:

				Weighted Average
	Warrants			Price
Outstanding at December 31, 2012		19,605,000		$	0.36
Granted		9,436,500			0.46
Exercised		-			-
Expired/Cancelled		(175,000	)		0.25
Outstanding at December 31, 2013		28,866,500		$	0.39

Granted		17,373,000			0.45
Exercised		-			-
Expired/Cancelled		(490,000	)		0.25
Outstanding at December 31, 2014		45,749,500		$	0.41

As of December 31, 2014 and 2013, 44,564,500 and 27,822,750 warrants were vested.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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+ Details

Rowl, Inc. 10-K