EQUITY

12 Months Ended

Dec. 31, 2012

EQUITY [Abstract]

EQUITY

NOTE 8 - EQUITY

Preferred stock:

The Company has authorized the issuance of up to 1,000,000 shares of preferred stock, none of which have been issued to date. The designations, preferences, limitations, restrictions, and relative rights of the preferred stock shall be established by the board of directors.

Common stock:

In November 2011, the Company issued 3,962,203 shares to five individuals who represent founders of the Company for $3,000. In July 2012, 1,485,788 of these shares were returned to the Company and cancelled.

In connection with the Company's 2011 debt offering, 354,947 shares were issued in 2011 for proceeds of $537,500. The offering continued through November 1, 2012, with an additional 1,615,515 common shares being issued for proceeds of $2,446,337. Additionally, the Company issued 67,688 shares of stock with notes payable valued at $102,500.

In connection with the Company's 2012 private placement offering to raise $1,500,000 for 1,000,000 shares at $1.50 per share that began in December 2012, 77,764 shares were issued by December 31, 2012, for proceeds of $116,644. Subsequent to December 31, 2012, an additional 334,115 shares were issued at $1.50 per share by February 28, 2013, for proceeds of $506,694.

In connection with services provided to the Company, the Company issued 18,160 common shares valued at $6,589 in 2012.

Subsequent to year end, additional notes and accrued interest of $641,420 were converted to 389,614 common shares.

Stock options:

Effective November 13, 2012, the Company adopted the 2012 Stock Option Plan (the "Plan"). Under the Plan, the Company may grant stock options, restricted and other equity awards to any employee, consultant, independent contractor, director or officer of the Company. A total of 1.5 million shares of common stock may be issued under the Plan (which number is subject to adjustment as described in the Plan).

In 2012, the Company granted stock options to the Company's CEO to purchase an aggregate of 660,368 shares of common stock. The Company's CEO was granted a five-year term option to acquire 660,368 shares of Company common stock at approximately $0.015 per share with 66,035 options vesting immediately and the remaining shares vest upon the achievement of the performance objectives determined by management, as defined. Subsequent to year end, the CEO exercised the vested options for $995.

The stock-based compensation cost that has been included as a charge to general and administrative expense in the statements of operations was approximately $32,600 for the year ended December 31, 2012 (none in 2011). For the year ended December 31, 2012, there was approximately $293,600 of unrecognized compensation cost related to non-vested stock options. The cost is expected to be recognized over a weighted-average period of less than five years.

The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options. The weighted-average fair value of options granted during the year ended December 31, 2012 was $0.51 per share. The assumptions utilized to determine the fair value of options granted during the years ended December 31, 2012, are as follows:

	2012
Risk free interest rate		0.62	%
Expected volatility		105	%
Expected term	5 years
Expected dividend yield		0

The expected term of stock options represents the period of time that the stock options granted are expected to be outstanding. The expected volatility is based on the historical price volatility of the common stock of similar companies since the Company does not have a sufficient history on the public stock exchange. The risk-free interest rate represents the U.S. Treasury bill rate for the expected term of the related stock options. The dividend yield represents the anticipated cash dividend over the expected term of the stock options.

The following tables set forth the activity in the Company's Plan for the year ended December 31, 2012 (no options were outstanding for 2011):

					Weighted
			Weighted		average
	Shares		average		remaining		Aggregate
	under		exercise		contractual		intrinsic
	option		price		life		value
Outstanding at January 1, 2012		-	$	-			$	-
Granted		660,368	$	0.02		4.75	$	980,591
Exercised		-	$	-		-	$	-
Forfeited/cancelled		-	$	-		-	$	-
Outstanding at December 31, 2012		660,368	$	0.02		4.75	$	980,591
Exercisable at December 31, 2012		66,035	$	0.02		4.75	$	99,058

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the estimated fair value of the Company's common stock on December 31, 2012 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they exercised their options on December 31, 2012.

The following table summarizes the activity and value of non-vested options as of and for the year ended December 31, 2012:

				Weighted
				average
	Number of			grant date
	options			fair value
Non-vested options outstanding at January 1, 2012		-		$	-
Granted		660,368		$	0.51
Vested		(66,035	)	$	0.51
Forfeited/cancelled		-		$	-
Non-vested options outstanding at December 31, 2012		594,333		$	0.51

Warrants:

On December 14, 2012, the Company entered into an indemnification agreement with JW Roth and Gary Tedder, both directors of the Company, for their personal risk regarding personal guarantees in favor of the Franchisor, which are the subject of an Area Development Agreement between the Franchisor and SH. In addition to the indemnification agreements, the Company compensated Messrs. Roth and Tedder for their personal guarantees in the form of a warrant to purchase up to 200,000 shares, per director, exercisable for ten years at $1.00 per share with the warrant vested immediately with a cashless exercise feature. The Company used the Black-Scholes pricing model to determine the weighted average fair value of the warrants. The Company used the contractual terms of the warrants, a risk free interest rate of .62%, and volatility of 105%. Approximately $27,750 has been recognized as stock-based compensation for the year ended December 31, 2012. The Company is to recognize the remaining compensation cost of approximately $194,250 through 2013.

In October 2012, the Company entered into a warrant agreement with a shareholder for services performed. The shareholder was immediately vested into 66,037 shares of common stock. The shareholder exercised this option in October 2012 at a price of $0.0005 per share. Approximately $36,000 was recognized as stock based compensation for the year ended December 31, 2012.