STOCK HOLDERS' EQUITY

9 Months Ended

Sep. 30, 2014

Equity [Abstract]

STOCK HOLDERS' EQUITY

13.   STOCKHOLDERS’ EQUITY

Common Stock

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

Since the issuance of the January 2014 notes, seven (7) of the January 2014 Issuance note holders converted their loan notes with principal balances totaling $485,000 and accrued interest of $3,669 into 97,733 shares of the Company’s common stock at a conversion price of $5.00 per share.

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 Warrant entitles the holder to purchase one share of the Company’s 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 the Company that its 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 an additional 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 the Company that its 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.

At September 30, 2014, there were 973,000 Series A Warrants issued and outstanding.

Series B Warrants

On January 29, 2014, the Company issued 160.5 Series B warrants, convertible to 32,100 shares of its common stock, to a broker-dealer as compensation for placement of convertible notes payable totaling $1,605,000. Each Series B Warrant allows the holder to purchase 200 shares of the Company’s 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 September 30, 2014, there were 213.5 Series B Warrants issued and outstanding in respect of 42,700 shares of the Company’s 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 the Company’s 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 8).  On September 24, 2014, the Company and Full Circle entered into Amendment No. 1 to the SPA, which changed the exercise price of the warrants issuable to $4.00 per share of the Company’s common stock, and increased the amount of warrants issuable to 1,400,000 warrants to purchase shares of the Company’s common stock. See Note 14 for discussion of accounting for value of the revisions.

At September 30, 2014, there were 1,400,000 Series C Warrants issued and outstanding (see Notes 13 and 14).

The following table summarizes information about warrants outstanding as of September 30, 2014:

	Exercise Price		Warrants Outstanding	Weighted Average Life of Outstanding Warrants in Months	Date of Expiration
Series A Warrants	$	10.00	973,000	22	7/31/2016
Series B Warrants		5.00	42,700	49	10/31/2018
Series C Warrants		4.00	1,400,000	28	1/21/2017
	$	6.43	2,415,700	26

The following table summarizes the changes in shares of common stock and warrants issued and outstanding for the nine months ended September 30, 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	-	1,400,000
Warrants issued to placement agent – Series B Warrants	-	32,100
Shares issued for services	200,000	-
Issued in settlement of $485,000 convertible notes payable and accrued interest of $3,669	97,773	-
Balance at September 30, 2014	13,684,933	2,415,700