COMMON AND PREFERRED STOCK

3 Months Ended

Jun. 30, 2013

Equity [Abstract]

COMMON AND PREFERRED STOCK

NOTE 8 – COMMON AND PREFERRED STOCK

Common Stock

On March 19, 2013, the Company issued 250,000 shares of restricted common stock, to Empire Relations Holdings, LLC, as consideration under a consulting agreement dated March 7, 2013 for public and financial relations services. The fair value was $15,500 based on the closing stock price of $0.062 per share on the measurement date as the shares are non-refundable and no future performance obligation exists.

On March 31, 2013, the Company agreed to issue 3,699,280 shares of common stock upon the conversion of the remaining balance of $32,000 of the guaranty note and accrued and unpaid interest of $6,060 (see notes 6 and 7).

Previously the Company appointed Mr. Jayme Canton to be an advisor to the Company’s Board of Directors. In April 2013, the Company agreed to issue to Mr. Canton 2,000,000 shares of common stock, a warrant to purchase 3,000,000 shares of common stock at an exercise price of $0.05 per share with an expiration date on the third year anniversary of the grant, and 250,000 shares of common stock to be issued at the end of each calendar quarter beginning on June 30, 2013 and ending on the earlier of March 31, 2015 (the term of Canton’s advisor role) or the date Canton is no longer serving as an advisor to the board of directors. The Company included $9,775 in stock based compensation expense for the shares issued as of June 30, 2013, based upon the market price of the common stock of $.0391 per share.

On April 23, 2013 the Company issued a Convertible Note to an unaffiliated third party in exchange and for the cancellation of a litigation contingency of $46,449, which was acquired by the third party. Also on April 23, 2013, the Company issued 1,750,000 shares of common stock in satisfaction of the April 23, 2013 Convertible Note. The shares were issued at $0.0265 per share, and the Company recorded a beneficial conversion feature expense of $29,561.

On June 26, 2013, B. Michael Friedman, the Company’s CEO exchanged 30,335,000 shares of common stock for 450,000 shares of Class B Preferred Stock. The Company reduced accrued compensation due Mr. Freidman of $100,022 and recognized stock based compensation expense of $2,821,275.

Preferred Stock

As of December 31, 2012, the Company had 800,000 shares of Series B Preferred Stock (the “Class B Preferred Stock”), par value $0.01 outstanding. On June 12, 2013, pursuant to Rodriguez’s resignation, non-execution of the employment agreement dated August 10, 2012 and the failure to close the transaction between the Company and SweetMD, Inc., the Company cancelled the book entry of Rodriguez’s 250,000 shares of Class B Preferred Stock.

Subsequent to the issuance of 450,000 shares of Class B Preferred Stock as above, there are 1,000,000 shares of Class B Preferred Stock outstanding as of June 30, 2013.

The rights, preferences and restrictions of the Class B Preferred Stock as amended, state; i)Each share of the Class B Convertible Preferred Stock shall automatically convert (the “Conversion”) into shares of the Corporation’s common stock at the moment there are sufficient authorized and unissued shares of common stock to allow for the Conversion. The Class B Convertible Preferred Stock will convert in their entirety, simultaneously to equal one half (1/2) the amount of shares of common stock outstanding on a fully diluted basis immediately prior to the Conversion. The Conversion shares will be issued pro rata so that each holder of the Class B Convertible Preferred Stock will receive the appropriate number of shares of common stock equal to their percentage ownership of their Class B Convertible Preferred Stock and ii) all of the outstanding shares of the Class B Preferred Stock in their entirety will have voting rights equal to the amount of shares of common stock outstanding on a fully diluted basis immediately prior to any vote. The shares eligible to vote will be calculated pro rata so that each holder of the Class B Convertible Preferred Stock will be able to vote the appropriate number of shares of common stock equal to their percentage ownership of their Class B Convertible Preferred Stock. The Class B Convertible Preferred Stock shall have a right to vote on all matters presented or submitted to the Corporation’s stockholders for approval in pari passu with holders of the Corporation’s common stock, and not as a separate class.

Warrants

On April 26, 2013 and in connection with the appointment of Mr. Jayme Canton to the Company’s advisory board, the Company issued a warrant to Mr. Canton to purchase 3,000,000 shares of common stock. The warrant expires on the three year anniversary and has an exercise price of $0.05 per share. The Company valued the warrant at $124,200 based on the Black Scholes formula and the following assumptions:

Estimated market value of common stock on measurement date: $0.04

Exercise price: $0.05

Risk free interest rate: 11%

Term in years: 3 years

Expected volatility: 223%

Expected dividends: 0.00%

A summary of the activity of the Company’s outstanding warrants at January 1, 2013 and June 30, 2013 is as follows:

	Warrants		Weighted-average exercise price		Weighted-average grant date fair value
Outstanding and exercisable at January 1, 2013		—	$	—	$	—
Granted		3,000,000		0.05		0.0414
Expired		—		—		—
Exercised		—		—		—
Outstanding and exercisable at June 30, 2013		3,000,000	$	0.05	$	0.0414