11. STOCK HOLDERS' EQUITY

3 Months Ended

Mar. 31, 2014

Equity [Abstract]

STOCK HOLDERS' EQUITY

Common Stock

On June 30, 2013, the Company issued 12,400,000 shares of common stock to its founders for cash consideration of $0.001 per share.

On January 5, 2014 the Company re-acquired 1,750,000 shares of our common stock for no consideration from existing common stockholders.  The re-acquired shares were returned to our authorized but unissued share account. The $1,750 gain on the return of these shares of common stock has been charged to stockholders’ equity.

Warrants

Series A warrants

Between July 11, 2013 and August 8, 2013, the Company issued 707,000 shares of its common stock and 707,000 Series A Warrants for cash consideration of $1.00 per share. Each Series A warrants entitles the holder to purchase one share of our common stock at a price of $10.00 per share.  The Series A Warrants expire on the earlier of August 1, 2016, or twenty days following written notification from us that our common stock had a closing bid price at or above $12.00 for any ten consecutive trading days. This condition has been met as of April 30, 2014; however, the Company has chosen not to force this conversion feature at this time.

Between August 14, 2013 and September 19 2013, the Company issued a further 266,000 shares and 266,000 Series A Warrants of its common stock for cash consideration of $1.00 per share. The Series A Warrants expire on the earlier of August 1, 2016, or twenty days following written notification from us that our common stock had a closing bid price at or above $12.00 for any ten consecutive trading days. This condition has been met as of April 30, 2014; however, the Company has chosen not to force this conversion feature at this time.

As at March 31, 2014, there were 973,000 Series A warrants issued and outstanding.

Series B Warrants

On January 29, 2014, the Company issued 106.5 series B warrants, convertible to 32,100 shares of our common stock, to a broker dealer as compensation for placement of convertible notes payable totaling $1,605,000.  Each Series B warrant allows holder to purchase 200 shares of our common stock at an exercise price of $5.00 per share at any time on or before October 31, 2018.  At the time the warrants were issued, they had an estimated fair market value of  $83,452, based on the Black-Scholes pricing model which has been recognized as part of the debt discount related to this note issuance and is being amortized over the life of the notes from January 29, 2014 through October 31, 2018 on a straight-line basis that approximates the effective interest method.

The following assumptions were used to derive the value of the warrants using the Black-Scholes pricing model:

Stock price	13.75
Risk-free interest rate	1.81	%
Expected dividend yield	0.00	%
Expected term (in years)	4.8
Expected volatility	171	%

At March 31, 2014, there were 213.5 Series B warrants issued and outstanding in respect of 42,700 shares of our common stock.

Series C Warrants

On January 21, 2014, the Company issued to Full Circle, for $500,000, warrants which allow Full Circle to purchase up to 1,000,000 shares of our common stock at any time on or prior to January 21, 2017 at a price of $5.50 per share. As part of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle to cover legal and deal related expenses of future financing transactions, which was recorded as deferred financing costs (see Note 7).   At March 31, 2014, there were 1,000,000 Series C warrants issued and outstanding (see Note 12).

The following table summarizes information about warrants outstanding as of March 31, 2014:

	Exercise Price		Warrants Outstanding		Weighted Average Life of Outstanding Warrants in Months		Date of Expiration
Series A Warrants	$	10.00		973,000		28	7/31/2016
Series B Warrants		5.00		42,700		56	10/31/2018
Series C Warrants		5.50		1,000,000		34	1/21/2017
	$	7.77		2,015,700		32

The following table summarizes shares of common stock and warrants issued and outstanding for the three months ended March 31, 2014:

	Common Stock		Warrants
Balance at December 31, 2013		15,137,200		983,600
Re-acquired shares of common stock		(1,750,000)		-
Warrants issued to Full Circle for $500,000 consideration – Series C Warrants		-		1,000,000
Warrants issued to placement agent – Series B Warrants		-		32,100
Issued in settlement of $255,000 convertible notes payable and accrued interest of $3,669		51,733		-
Balance at March 31, 2014		13,438,933		2,015,700