STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2012

Stockholders' Equity Note [Abstract]

STOCKHOLDERS EQUITY

NOTE 8. STOCKHOLDERS’ EQUITY

Common Stock

During the years ended December 31, 2012 and 2011, we issued common stock to compensate officers, employees, directors and outside professionals, to make an acquisition and to settle a lawsuit. The stock issuances were valued based on the quoted market price of our common stock on the respective measurement dates. Following is an analysis of common stock issuances during the years ended December 31, 2012 and 2011:

In February 2012, we converted $1,020,200 of outstanding debt into 557,486 shares of common stock. See Note 6.

In May 2012, we issued 170,000 shares of common stock to acquire Gleric Holdings, LLC. See Note 4.

In May 2012, we entered into a Settlement Agreement and Mutual General Release with James McKay and Celebrity Foods, Inc., which agreement settled and released all parties from claims in connection with the lawsuit originally filed on January 19, 2010 in the United States District Court, Eastern District of Pennsylvania. The terms of the agreement provide that Mr. McKay and Celebrity Foods will retain an aggregate of 448,000 shares of stock and be issued an aggregate of 135,000 additional restricted shares at $1.39 per share. All of the shares retained by and issued to Mr. McKay and Celebrity Foods are subject to a leak-out provision. We also agreed to pay certain attorney’s fees which included the issuance of 100,000 restricted shares valued at $1.39 per share of common stock to the attorney of Mr. McKay and Celebrity Foods, which shares are also subject to a leak-out provision. See Note 11.

In July 2012 and December 2012, we issued 15,000 and 30,000 restricted shares of common stock valued at $1.14 and $0.54 per share, respectively, in connection with the engagement of an investor relations consultant.

In August 2012, we issued an aggregate of 300,000 restricted shares of common stock, valued at $1.05 per share, in connection with the engagement of a business development consultant.

In December 2012, we issued 10,000 restricted shares of common stock to two separate consultants for their work on various matters for a total of 20,000 shares of common stock valued at $0.54 per share.

In September 2011, we issued 100,000 restricted shares of common stock to John Bergeron, our Chief Financial Officer, valued at $94,000, as compensation under his employment agreement.

In August and December 2011, we received and cancelled a total of 515,000 shares of common stock in settlement of a legal dispute. The legal fees we incurred in obtaining the return of this common stock were treated as cost of treasury stock subsequently retired.

Warrants

We currently have five series of outstanding warrants. Series B and Series C warrants were issued with the debentures that we sold to five investors during 2011 and 2010. See Note 7 for further details.

During 2012, as described in Note 7, we issued two warrants to investors 1) to purchase 69,445 shares of common stock in conjunction with the convertible note payable and 2) to purchase 333,333 shares of common stock in conjunction with the secured note payable.

During 2011, we issued 400,000 Series D warrants as compensation for the consultants who sold the debentures. The warrants were immediately exercisable. The weighted-average estimated fair value of the warrants issued ranged from $0.57-$0.74 per share using the Black-Scholes model with the following assumptions:

Expected volatility	ranging from 177.23 to 187.74
Risk-free interest rate	ranging from 0.52% to 1.25%
Expected life	4 years
Estimated forfeitures	0%, based on limited forfeiture history
Dividend yield	0%

The fair value of the Series D warrants issued in 2011 was $279,000 and was recorded as a Debt Cost asset which is amortized over the life of the warrants. The remaining unamortized portion of the Debt Cost asset is $55,786 at December 31, 2012. Interest expense of $111,600 and $111,614 was recognized in the Statements of Operations for the years ended December 31, 2012 and 2011, respectively.

A summary of the warrant activity for the years ended December 31, 2012 and 2011 follows:

						Weighted-
				Weighted-		Average		Aggregate
	Shares			Average		Remaining		Intrinsic
	Underlying			Exercise		Contractual		Value
Description	Warrants			Price		Term (in years)		(In-the-Money)
Outstanding and exercisable at  December 31, 2010		200,000		$	2.75		2.5	$	-
Warrants issued with long-term debentures		200,000		$	2.75		1.5	$	-
Warrants issued as consultant compensation		400,000		$	1.00		3.1	$	400,000
Outstanding and exercisable at  December 31, 2011		800,000		$	1.88		2.3	$	400,000
Warrants issued with long-term notes payable		402,778		$	1.63		2.5	$	-
Warrants expired (Series A)		(200,000	)	$	-		-	$	-
Outstanding and exercisable at  December 31, 2012		1,002,778		$	1.85		2.0	$	-

The following summarizes outstanding warrants and their respective exercise prices at December 31, 2012:

	Shares						Remaining
	Underlying		Exercise		Dates of		Contractual
Description	Warrants		Price		Expiration		Term (in years)
Series B Warrants		100,000	$	3.00		Dec 2013		1
Series C Warrants		100,000	$	5.00		Dec 2013		1
Series D Warrants		200,000	$	1.00		Dec 2014		2
Series D Warrants Series C warrants		200,000	$	1.00		Mar 2015		2.3
Convertible Note Warrants		69,445	$	1.80		Sep 2014		1.5
Secured Note Warrants		333,333	$	1.60		Aug 2015		2.7
		1,002,778

Stock Options

The Company recognizes compensation expense related to stock options in accordance with the Financial Accounting Standards Board (“FASB”) standard regarding share-based payments, and as such, has measured the share-based compensation expense for stock options granted during the years ended December 31, 2012 and 2011 based upon the estimated fair value of the award on the date of grant and recognizes the compensation expense over the award’s requisite service period. The weighted average fair values were calculated using the Black Scholes option pricing model.

On June 28, 2012, we issued 150,000 stock options to directors as follows:

· Options to purchase up to a total of 150,000 shares of common stock were granted to the certain members of the Board of Directors. These options vested and became exercisable immediately. The weighted-average estimated fair value of the stock options granted was $1.15 per share using the Black-Scholes model with the following assumptions:

Expected volatility	136.0
Risk-free interest rate	0.40%
Expected life	3 years
Dividend yield	0%

On December 1, 2012, we issued 600,000 stock options to officers as follows:

· Options to purchase up to a total of 600,000 shares of common stock were granted to three officers as they each were given employment agreements which included the right to purchase 200,000 shares of common stock at the price of $.54 per share for the next two years. These options vest evenly every six months over the first two years of the five-year life of the options. The weighted-average estimated fair value of the stock options granted was $0.46 per share using the Black-Scholes model with the following assumptions:

Expected volatility	130.21
Risk-free interest rate	0.61%
Expected life	5 years
Dividend yield	0%

On June 6, 2011, we issued 975,000 stock options to directors and officers as follows:

· Options to purchase up to a total of 75,000 shares of common stock were granted to our three independent members of the Board of Directors. These options vested and became exercisable immediately. The weighted-average estimated fair value of the stock options granted was $0.65 per share using the Black-Scholes model with the following assumptions:

Expected volatility	164.6
Risk-free interest rate	0.74%
Expected life	3 years
Dividend yield	0%

· Options to purchase up to a total of 900,000 shares of common stock were granted to our two executive officers. These options vest and become exercisable in twelve quarterly periods for the first three years of the five-year life of the options. The weighted-average estimated fair value of the stock options granted was $0.72 per share using the Black-Scholes model with the following assumptions:

Expected volatility	164.6
Risk-free interest rate	1.60%
Expected life	5 years
Dividend yield	0%

Details of stock option activity for the years ended December 31, 2012 and 2011 follows:

						Weighted-
						Average		Aggregate
	Shares			Weighted		Remaining		Intrinsic
	Underlying			Average		Contractual		Value
Description	Options			Exercise Price		Term (Years)		(In-the-Money)
Outstanding at December 31, 2010		-		$	-		-	$	-
Options granted		975,000		$	0.77		3.2	$	-
Options exercised		(100,000	)	$	0.77		-	$	-
Outstanding at December 31, 2011		875,000		$	0.77		3.2	$	-
Options granted		750,000		$	0.66		4.4	$	-
Options forfeited		(225,000	)	$	0.77		-	$	-
Outstanding at December 31, 2012		1,400,000		$	0.71		3.8	$	-
Exercisable at December 31, 2012		513,736		$	0.88		3.0	$	-

The following summarizes outstanding stock options and their respective exercise prices at December 31, 2012:

	Shares						Remaining
	Underlying		Exercise		Dates of		Contractual
Description	Options		Price		Expiration		Term (in years)
Directors Options		50,000	$	0.77		Jun 2014		1.4
Officers Options		600,000	$	0.77		Jun 2016		3.4
Directors Options		150,000	$	1.15		Jun 2015		2.5
Officers Options		600,000	$	0.54		Dec 2017		4.9
		1,400,000

The fair value of the options granted during the years ended December 31, 2012 and 2011 was $408,000 and $696,750, respectively, which includes the forfeiture of $151,055 by John Talamas, our former COO, when he left his employment in May 2012. We recorded $300,000 and $171,585 in compensation expense in operating, general and administrative expenses in the Statements of Operations for the years ended December 31, 2012 and 2011, respectively. As of December 31, 2012, there was approximately $482,110 of total unrecognized compensation expense related to non-vested stock option awards. The remaining $482,110 in compensation expense will be recognized at $72,000 per quarter with the final $122,110 being recognized in the last three quarters ended December 31, 2014.