INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES

9 Months Ended

Sep. 30, 2014

INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES [Abstract]

INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES

NOTE 4 – INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES

On May 30, 2014, we received 1,187,500 common shares and 3,000,000 warrants to purchase common shares of WeedMD RX Inc. (“WMD”), a Canadian private company in the cannabis industry, in exchange for future consulting services and use of our intellectual property. The shares represent a 4.29% equity investment in WMD and we do not have significant influence over the investee. We recorded our investment in these non-marketable equity securities at the estimated cost, based on our estimate of the fair value of the securities we received on the date of the transaction.

The warrants entitle us to purchase WMD shares for CDN $0.50 each for a period of nine months from the date the warrant was issued. In addition, we are required to exercise all of these warrants if the holders of our Series A Warrants (see Note 14 below) exercise a minimum of 800,000 of our Series A Warrants prior to the expiration of the WMD warrants.

The WMD common shares were recorded at $0.50 per share based on WMD's most recent sale of their common shares prior to the date of the transaction (CDN $0.50).

The WMD warrants were recorded at $0.10 per warrant utilizing the Black Scholes option pricing model and the following assumptions during the nine months ended September 30, 2014:

Risk free interest rate	0.60	%
Expected term (years)	0.5
Expected volatility	70	%
Expected dividends	0	%

The $300,000 fair value assigned as the cost to the WMD warrants has been classified as a current asset as the warrants expire after nine months, while the $593,750 assigned to the cost of the WMD common shares has been classified as a long term asset as these shares do not expire.