STOCKHOLDERS’ EQUITY

Common Stock

From January 1, 2015 to March 31, 2015, three of the January 2014 Issuance note holders and one of the December 2013 Issuance note holders converted loan notes with principal balances totaling $290,000 and accrued interest of $1,063 into 58,213 shares of the Company’s common stock at a conversion price of $5.00 per share.

On January 21, 2015, Full Circle executed its option to cashlessly exercise 1,215,000 warrants in exchange for 660,263 common shares of the Company’s stock (see Note 13).

On January XX, 2015, the Company issued 50,000 shares to Spector Group in satisfaction of architectural services performed for The Greenhouse.

On March 26, 2015, pursuant to the terms of the IPG APA, the Company will deliver to Seller 500,000 restricted shares of the Company’s common stock, which will vest over a one-year period. On the date of the agreement, the 500,000 shares had an initial fair value of $1,240,000, based on a closing price per share of the Company of $2.48 on March 26, 2015. Due to restrictions in the ability to trade the Company’s shares, a discount of fifteen percent (15%) was applied to the fair value of the shares the Company issued and anticipates issuing to Infinity Capital and the net amount is being amortized over the relative service periods. Approximately $1,054,000 and was recorded to accrued stock payable as a component of the purchase price of the IPG Acquisition (see Note 4).

Warrants

Warrants consists of the following at March 31, 2015:



	Exercise Price		Warrants Outstanding	Weighted Average Life of Outstanding Warrants in Months	Date of Expiration
Series A Warrants	$	10.00	973,000	16	7/31/2016
Series B Warrants	5.00		42,700	43	10/31/2018
Series C Warrants	4.00		185,000	22	1/21/2017
Evans Warrants	4.40		600,000	19	10/21/2016
Spector Warrants	4.40		150,000	21	12/12/2016
IPG Warrants	4.50		250,000	36	3/26/2018
IPGa Warrants	5.00		250,000	36	3/26/2018
	$	6.68	2,450,700	21.92

Series C Warrants

On January 21, 2014, the Company issued to Full Circle, for $500,000, fully-vested warrants which allow Full Circle to purchase up to 1,000,000 shares of the Company’s common stock at any time on or prior to January 21, 2017 at a price of $5.50 per share. As part of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle to cover legal and deal related expenses of future financing transactions, which was recorded as deferred financing costs (See Note 7). On September 24, 2014, the Company and Full Circle entered into Amendment No. 1 to the SPA, which changed the exercise price of the warrants issuable to $4.00 per share of the Company’s common stock, and increased the amount of warrants issuable to 1,400,000 warrants to purchase shares of the Company’s common stock. On January 21, 2015, Full Circle executed its option to cashlessly exercise 1,215,000 warrants in exchange for 660,263 common shares of the Company’s stock (see Note 13). At March 31, 2015, there were Series C warrants representing 185,000 of the Company's common stock outstanding. As of May 4, 2015, Full Circle had exercised the remainder of its 185,000 warrants (see Note 17).

IPG Warrants

In connection with the IPG APA, the Company issued to IPG fully-vested warrants to purchase 250,000 shares of the Company’s common stock at a conversion price of $4.50 per share, (the "IPG $4.50 Warrants"), and 250,000 shares of the Company’s common stock at a conversion price of $5.00 per share (the "IPG $5.00 Warrants")(collectively, the "IPG Warrants"). The IPG Warrants are subject to customary adjustments in the event of reclassification of the Company, consolidation of the Company, merger, subdivision of shares of the Company’s common stock, combination of shares of the Company’s common stock or payment of dividends in the form of the Company’s common stock. The IPG Warrants expire three years after their initial issuance date. On the date of grant, the IPG $4.50 Warrants and the IPG $5.00 Warrants had fair values of approximately $421,000 and $412,000 based on the Black-Scholes pricing model, which was included in the purchase price of IPG (See Note 4).

The following tables summarize the changes in warrants issued and outstanding for the three months ended March 31, 2015 and 2014, respectively:



	2015		2014
Beginning balance	3,165,700		983,600
Warrants issued to placement agent - Series B Warrants	—		32,100
Warrants issued to Full Circle for $500,000 consideration - Series C Warrants	—		1,000,000
Warrants issued to IPG	500,000		—
Warrants converted by Full Circle via cashless conversion option	(1,215,000	)	—
Ending balance, March 31	2,450,700		2,015,700

Fair Value of Warrants

Fair value is generally based on independent sources such as quoted market prices or dealer price quotations. To the extent certain financial instruments trade infrequently or are non-marketable securities, they may not have readily determinable fair values. The Company estimated the fair value of the warrants using a Black-Scholes option pricing model and available information that management deems most relevant. The stock price is the closing price of the Company’s stock on the valuation date; the risk-free interest rate is based on the U.S. Government Securities average rate for five or two-year maturities on the date of issuance; the volatility is a statistical measure (standard deviation) of the tendency of the Company’s stock price to change over time; the exercise price is the price at which the Warrants can be purchased by exercising prior to expiration; the dividend yield is not applicable due to the Company not intending to declare dividends; the expected term is based on the contractual life of the warrants; and the fair market value is value of the warrants based on the Black Scholes model on the valuation date. The following assumptions were used to derive the value of the warrants issued during the three months ended March 31, 2015:



	IPG $4.50 Warrants		IPG $5.00 Warrants
Grant date	3/26/2015		3/26/2015
Stock price on Grant date	2.48		$	2.48
Exercise price of warrant	4.50		$	5.00
Risk-free interest rate	0.98	%	0.98		%
Expected dividend yield	—	%	0.00		%
Expected term (in years)	3.0		3.0
Expected volatility	134	%	134		%