Warrants

6 Months Ended

Jun. 30, 2013

Note 8: Warrants

As discussed in Note 7, the Company issued warrants during the six months ended June 30, 2013. The following summarizes the warrant activity for the six months ended June 30, 2013:

	Number of Units		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Intrinsic value

Outstanding at December 31, 2012		342,000	$	0.01
Grants		5,799,546		0.73
Outstanding at June 30, 2013		6,141,546	$	0.69		1.6	$	150,930

Exerciseable at June 30, 2013		6,141,546	$	0.69		1.6	$	150,930

The weighted-average grant date fair value for the six months ended June 30, 2013 equaled $1.37 per share.

On January 30, 2013, the Company issued 4,000,000 warrants to Hartford Equity, Inc. in conjunction with the $2,000,000 Financing Agreement discussed within Note 7. The grant-date fair value of these warrants was $914,388, which was calculated based on a pro-rata allocation of the grant-date fair value of the stock and warrants related to the $2,000,000 Financing Agreement to the proceeds received of $2,000,000.

During February and March 2013, the Company issued a total of 1,000,000 warrants to Newmarket Traders LTD as discussed within Note 7. The grant-date fair value of these warrants was $224,298; which was calculated based on a pro-rata allocation of the grant-date fair value of the stock and warrants related to the $500,000 Financing Agreement to the proceeds received of $500,000.

During the three months ended June 30, 2013 the Company issued 3,000 and 19,500 warrants to a related party lender and third party lender, respectively. During the six months ended June 30, the Company issued 6,000 and 39,000 warrants to a related party lender and third party lender, respectively. The issuances were related to outstanding notes payable agreements with warrant features stating that for every $10 outstanding at the end of each calendar month the Company will issue the lender one warrant to purchase one share of the Company’s common stock at no more than $0.01 per share with no vesting requirement and a term of five years. The grant-date fair value of these warrants was $9,675 and $31,575, for the three and six months ended June 30, 2013, respectively, which was recorded as a debt discount. During the three and six months ended June 30, 2013 $7,666 and $10,263 of this debt discount was accreted to interest expense.

On June 15, 2013, the Company issued 377,273 warrants relating to a $1.5 million securities purchase agreement with UFF entered into on May 20, 2013. The issuances were related to proceeds received of $166,000 which is the first of nine scheduled installments beginning June 15, 2013 and ending January 1, 2014. Pursuant to the agreement, the Company receives cash in exchange for the issuance of 2,727,273 units at a price of $0.55 per unit. Each unit consists of one share of common stock and a warrant to purchase 1.25 shares of the Company’s common stock at an exercise price equal to $0.65 per share, exercisable over five years. The grant date fair value of the warrants issued on June 15, 2013 was $88,936, which was calculated on a pro-rata allocation of the grant date fair value of the stock and warrants related to the $1.5 million securities agreement to the proceeds received of $166,000.

On June 15, 2013, the Company issued 377,273 warrants relating to a $1.5 million financing and security agreement and a secured convertible subordinated promissory note with UFF entered into on May 20, 2013. The issuances were related to proceeds received of $166,000 which is the first of nine scheduled installments beginning June 15, 2013 and ending January 1, 2014. Pursuant to the agreement and the note, the conversion price is $0.55 per share, to purchase 1.25 shares of restricted common stock at a per share exercise price of $0.65 with a term of 18 months. The grant date fair value of the warrants issued on June 15, 2013 was $113,558 of which $95,624 was allocated as a debt discount and beneficial conversion. During the three and six months ended June 30, 2013, $796 of this debt discount was accreted to interest expense.

The warrants issued during the six months ended June 30, 2013 were valued using the Black-Scholes pricing model with the following range of assumptions:

Black-Scholes Pricing Model Assumptions
Exercise price	$	0.01 - $0.75
Stock price	$	0.40 - $1.94
Volatility		153.81% - 196	%
Risk-free interest rate		0.20% - 1.41	%
Expected Term		1.5 - 5 years