2.4.0.82115100 - Disclosure - Stockholders' Equitytruefalsefalse1false falsefalseD2013Q2YTDhttp://www.sec.gov/CIK0001350102duration2013-01-01T00:00:002013-06-30T00:00:001true 1us-gaap_StockholdersEquityNoteAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse0Stockholders' Equity Note [Abstract]2false 2us-gaap_StockholdersEquityNoteDisclosureTextBlockus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalseterseLabel1falsefalsefalse00<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;font-size:10pt;">STOCKHOLDERS’ EQUITY</div><div style="line-height:120%;padding-top:6px;text-indent:32px;font-size:10pt;">Common Stock</div><div style="line-height:120%;padding-top:6px;text-indent:32px;font-size:10pt;">At June 30, 2013, the Company had 125,000,000 shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of June 30, 2013, the Company had 54,135,610 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through June 30, 2013.</div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">In January 2013, the Company retained a consulting firm to provide certain consulting services relating to the retail distribution of the Company's consumer products. In exchange for the consulting services, the Company issued 240,000 unregistered shares of Common Stock to the consulting firm. Under the terms of the consulting agreement, the Company will hold the shares in escrow until January 2014. With this issuance, half of the shares vested immediately, and the remaining shares are expected to vest in January 2014. </div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">In April 2013, the Company entered into a Stock Purchase Agreement with an investor to sell an aggregate of 2,500,000 unregistered shares of common stock at a per share price of $0.57. In May 2013, the Company received proceeds of $1,425,000 from this transaction.</div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">Preferred Stock</div><div style="line-height:120%;padding-top:6px;text-indent:32px;font-size:10pt;">At June 30, 2013, the Company had 25,000,000 shares of preferred stock, $0.0001 par value, authorized for issuance, of which 750,000 shares have been designated as Series A Preferred Stock. Preferred stock may be issued in classes or series. Designations, powers, preferences, rights, qualifications, limitations and restrictions are determined by the Company’s Board of Directors. As of June 30, 2013, the Company had 125,000 shares of Series A preferred stock outstanding. As of June 30, 2013, the Company had not declared or paid any dividends related to the preferred stock.</div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">Series A Preferred Stock</div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">In June 2013, the Company entered into a Securities Purchase Agreement with an investor to sell an aggregate of 750,000 shares of Series A Preferred Stock at a price of $8.00 per share, resulting in gross proceeds of $6,000,000. This purchase agreement included warrants to purchase up to 2,625,000 shares of common stock of the Company. </div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of 8.0% per annum when and if declared by the Board of Directors in its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 10% below market price), at the discretion of the Board of Directors. The dividend rate on the Series A Preferred Stock is indexed to the Company's stock price and subject to adjustment. In addition, the Securities Purchase Agreement contains a make-whole provision whereby, conversion or redemption of the preferred stock within 4 years of issuance will require dividends for the full four year period to be paid by the Company in cash or common stock (valued at 10% below market price).</div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">The Series A Preferred Stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $1.60, as adjusted, for 20 consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series A Preferred Stock at a price of $8.00 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). As of June 30, 2013, the Company was entitled to redeem the outstanding preferred shares for $1.0 million in cash, plus a make-whole amount of $0.3 million, payable in cash or 418,967 common shares. At June 30, 2013, the preferred shares were not eligible for conversion to common shares at the option of the Company. The holder of the preferred shares may convert to common shares at any time, at no cost, at a ratio of 1 preferred share into 10 common shares (subject to standard ratable anti-dilution adjustments). Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends and also any make-whole amount (if applicable).</div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">Except as otherwise required by law (or with respect to approval of certain actions), the Series A Preferred Stock shall have no voting rights. Upon any liquidation, dissolution or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, the holders of Series A Preferred Stock shall be entitled to receive, pari passu with any distribution to the holders of common stock of the Company, an amount equal to $8.00 per share of Series A Preferred Stock plus any accrued and unpaid dividends.</div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">The warrants offered as part of the Securities Purchase Agreement have a three year term and require payment of an exercise price of $0.90 per common share to the Company.</div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">The transfer of cash and securities in the Series A Preferred Shares Securities Purchase Agreement will take place incrementally. At the initial closing on June 17, 2013, the Company sold 125,000 shares of Series A Preferred Stock and a warrant to purchase 437,500 shares of common stock and received proceeds of $1,000,000. On August 7, 2013, the Company sold 375,000 shares of Series A Preferred Stock and a warrant to purchase 1,312,500 shares of common stock and received proceeds of $3,000,000. The Company expects to receive the final $2,000,000 in August 2013. Once the final proceeds are received, the Company will issue 250,000 shares of Series A Preferred Stock and a warrant to purchase 875,000 shares of common stock. </div><div style="line-height:120%;padding-top:12px;text-indent:30px;font-size:10pt;">Accounting for the Series A Preferred Shares</div><div style="line-height:120%;padding-top:12px;text-align:left;text-indent:30px;font-size:10pt;">As of June 30, 2013, the Company recorded only the initial closing, or 125,000 preferred shares and 437,500 warrants issued and the $1,000,000 received prior to June 30, 2013. The remainder of the transaction will be recorded when cash and securities have been exchanged.</div><div style="line-height:120%;padding-top:12px;text-align:left;text-indent:30px;font-size:10pt;">Upon its issuance, the Series A Preferred Stock was first evaluated under FASB ASC 480, “ Distinguishing Liabilities from Equity” (“ASC 480”), and it was determined that it was not within the scope of ASC 480; therefore, the Series A Preferred Stock was not considered a liability under ASC 480. The warrants associated with the Series A Preferred Stock offering were also not considered a liability as assessed under ASC 480.</div><div style="line-height:120%;padding-top:12px;text-align:left;text-indent:30px;font-size:10pt;">Under FASB ASC 470, “ Debt with Conversion Features and Other Options” (“ASC 470"), the proceeds from issuance must be allocated to both the Series A Preferred Stock and the warrants using the relative fair value method. The allocation of proceeds to the warrants created a discount in the fair value of the Series A Preferred Stock in the amount $0.2 million. Because the Series A Preferred Stock was immediately convertible, the discount was accreted as of the date of issuance.</div><div style="line-height:120%;padding-top:12px;text-align:left;text-indent:30px;font-size:10pt;">The Series A Preferred Stock was then evaluated under ASC 470 to determine if there was a beneficial conversion feature (“BCF”). A convertible financial instrument includes a BCF if its conversion rate is lower than the issuer's stock price at the commitment date. The BCF compares the carrying value of the preferred stock after the value of any derivatives or equity instruments have been allocated from the proceeds to the transaction date value of the number of shares of common stock that the holder would receive upon conversion. The calculation resulted in a BCF of $0.1 million. Because the Series A Preferred Stock was immediately convertible, the BCF was recorded as a deemed dividend as of the date of issuance.</div><div style="line-height:120%;padding-top:12px;text-align:left;text-indent:30px;font-size:10pt;">The Series A Preferred Stock issuance includes a make-whole provision with a variable rate dividend which is indexed to the Company's own stock. The make-whole provision has attributes of an embedded derivative and was evaluated under ASC 815, “ Derivatives and Hedging” (“ASC 815”). The Company believes that the Series A Preferred Stock is an equity host for the purposes of evaluating the make-whole provision for potential bifurcation. The Series A Preferred Stock holder is entitled to convert to common shares at any time after issuance. If converted within four years of issuance, the holder is entitled to a make-whole dividend which is payable in cash or registered shares, at the Company's election. The Company concluded that the make-whole payment should be characterized as an embedded derivative under ASC 815. The Company recorded a make-whole dividend of $0.3 million during the three months ended June 30, 2013 and a corresponding make-whole dividend liability of $0.3 million as of June 30, 2013. The fair value of this dividend liability, which is indexed to the Company's common stock, will be evaluated at each period end, with changes in fair value recorded in Other Income/(Expense) in the Condensed Statements of Operations.</div></div>falsefalsefalsenonnum:textBlockItemTypenaThe entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Article 4 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 43 -Section B -Paragraph 7, 11A -Chapter 1 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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