9. STOCKHOLDERS’ DEFICIENCY

PREFERRED STOCK

SERIES A CONVERTIBLE PREFERRED STOCK

On March 24, 2016, the Company issued 500,000 shares of Series A Convertible Preferred Stock to the Company’s Chief Operating Officer in connection with his March 24, 2015 employment agreement. The $500,000 fair value of the shares was recognized over the one year service period.

The Series A Convertible Preferred Stock shall have no liquidation preference so long as the Series C Convertible Preferred Stock shall be outstanding.

SERIES B CONVERTIBLE PREFERRED STOCK

As of March 31, 2016, the liquidation preference for the Series B Convertible Preferred Stock was equal to $825,000.

SERIES C CONVERTIBLE PREFERRED STOCK

On March 11, 2016, the Company entered into a securities purchase agreement with a purchaser for gross proceeds of an aggregate of $2,900,040 (“Subscription Amount”), of which, $650,040 was paid to the Company at closing and the remaining $2,250,000 (“Milestone Amounts”) was payable to the Company upon the completion of certain milestones (“Milestones”), as specified in the agreement. Through March 31, 2016, net proceeds of an aggregate of $680,830 (gross proceeds of $800,040 less issuance costs of $119,210, of which, as of March 31, 2016, $79,208 had not been paid and was included within accrued expenses) of the Subscription Amount had been paid to the Company. See Note 5 – Accrued Expenses – Warrants Payable and Note 8 – Fair Value Measurement for additional details. As a result, the Company issued the following to the purchaser during the three months ended March 31, 2016: (i) 13,334 shares of Series C Convertible Preferred Stock and (ii) five-year warrants to purchase an aggregate of 1,904,857 shares of common stock at an exercise price of $1.00 per share with an issuance date fair value of $88,973 which was recorded as a derivative liability. Subsequent to March 31, 2016, based on the Company’s achievement of certain of the milestones prior to the June 24, 2016 deadline, the Company received an aggregate of $467,120 and, as a result, issued an aggregate of 7,786 shares of Series C Convertible Preferred Stock and warrants to purchase an aggregate of 1,112,190 shares of common stock at an exercise price of $1.00 per share.

PREFERRED STOCK – CONTINUED

SERIES C CONVERTIBLE PREFERRED STOCK - CONTINUED

On March 11, 2016, the Company entered into a securities purchase agreement with a purchaser for net proceeds of an aggregate of $85,285 (gross proceeds of $99,960 less issuance costs of $14,675, of which, as of March 31, 2016, $9,677 had not been paid and was included within accrued expenses). See Note 5 – Accrued Expenses – Warrants Payable and Note 8 – Fair Value Measurement for additional details. Pursuant to the securities purchase agreement, the Company issued the following to the purchaser: (i) 1,666 shares of Series C Convertible Preferred Stock, and (ii) a five-year warrant to purchase 238,000 shares of common stock for an exercise price of $1.00 per share with an issuance date fair value of $10,458 which was recorded as a derivative liability.

On March 24, 2016, the Company issued 750 shares of Series C Convertible Preferred Stock to the Company’s Chief Operating Officer in connection with his March 24, 2015 employment agreement. The $75,000 fair value of the shares was recognized over the one year service period.

During the three months ended March 31, 2016, the Company issued 444 shares of Series C Convertible Preferred Stock valued at $39,964 to the Company’s Executive Chairman of the Board in satisfaction of amounts previously owed which was accrued for as of December 31, 2015.

During the three months ended March 31, 2016, the Company issued 2,932 shares of Series C Convertible Preferred Stock in satisfaction of the $293,200 dividend for the three months ended December 31, 2015 and 3,184 shares of Series C Convertible Preferred Stock in satisfaction of the $318,400 dividend for the three months ended March 31, 2016.

In the event of a liquidation, the Series C Convertible Preferred Stock is also entitled to a liquidation preference equal to the stated value plus any accrued and unpaid dividends, which, as of March 31, 2016, was equal to $14,264,000.

NON-CONTROLLING INTERESTS

350 Green is not owned by the Company but is deemed to be a VIE where the entirety of its results of operations are consolidated in the Company’s financial statements. See Note 4 – Assets and Liabilities Transferred to Trust Mortgage – 350 Green for additional details.

STOCK-BASED COMPENSATION

The Company recognized stock-based compensation expense related to preferred stock, common stock, stock options and warrants for the three months ended March 31, 2016 and 2015 of $561,246 and $1,760,234, respectively. As of March 31, 2016, there was $287,148 of unrecognized stock-based compensation expense related to stock options that will be recognized over the weighted average remaining vesting period of 1.1 years.

STOCK OPTIONS

The weighted average estimated fair value of the options granted during the three months ended March 31, 2016 and 2015 was $0.14 and $1.04 per share, respectively.

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following assumptions:

A summary of the option activity during the three months ended March 31, 2016 is presented below:

The following table presents information related to stock options at March 31, 2016:

STOCK WARRANTS

See Note 9 – Stockholders’ Deficiency – Preferred Stock – Series C Convertible Preferred Stock for details associated with the issuances of warrants in connection with the security purchase agreements.

In January 2016, the Company agreed to extend the maturity date of warrants to purchase an aggregate of 1,290,000 shares of common stock with an exercise price of $2.25 per share by eighteen (18) months in exchange for the warrant holders agreeing to the deletion of a fundamental transaction provision. As a result, the Company recorded warrant modification expense of $5,827 during the three months ended March 31, 2016.

A summary of the warrant activity during the three months ended March 31, 2016 is presented below:

The following table presents information related to warrants at March 31, 2016:

COMMON STOCK

In March 2016, one of the former members of Beam returned 242,303 shares of the Company’s common stock to the Company in exchange for cash of $45,000. The shares of common stock were cancelled by the Company in March 2016.

During the three months ended March 31, 2016, the Company issued an aggregate of 101,962 of fully vested shares of the Company’s common stock at the closing market price on the date of the respective meetings to members of the Board of Directors. The shares had an aggregate grant date fair value of $20,991 which was accrued for as of December 31, 2015.