Commitments and Contingencies

9 Months Ended

12 Months Ended

Sep. 30, 2013

Dec. 31, 2012

Commitments And Contingencies

Commitments and Contingencies

Note 2: Commitments and Contingencies

Litigation

The Company may from time to time be involved in legal proceedings arising from the normal course of business. There are no pending or threatened legal proceedings as of September 30, 2013.

Consulting Services

On October 18, 2012, the Company entered into a professional services agreement. The agreement requires the Company to pay a monthly cash retainer of $12,500 to cover professional services provided by the service provider. Additionally, any service that exceeds the $12,500 retainer, are to be paid through issuances of the Company’s common stock with a vesting schedule of six months from delivery date. On March 4, 2013, the Company added an addendum to this agreement. This addendum amended the agreement so that each month is a fixed fee of $25,000 payable in $12,500 cash and $12,500 in restricted common stock. The addendum also waived all fees and other amounts exceeding $25,000 owed for November and December 2012 for services rendered. On March 8, 2013, the Company issued 18,868 shares of restricted common stock representing $25,000 worth of stock for services rendered during November and December of 2012. On March 8, 2013, the Company also issued 45,000 shares of restricted common stock representing payment for website construction in fiscal year 2013 valued at $55,800 based on the closing share price of $1.24 on March 8, 2013.   On July 1, 2013, the Company terminated the consulting services agreement and issued 70,414 shares of common stock to pay the outstanding balance of approximately $75,000 due to the consultants.

On October 29, 2012, the Company entered into a professional services agreement. In connection with the agreement, the Company issued 454,863 warrants to purchase common stock at an exercise price of $0.98 per share with a term of 5 years in exchange for professional services. As of September 30, 2013, all warrants were exercisable. The agreement also calls for certain incentives that if achieved call for the disbursement of $500,000 or more depending on the size of transaction as well as fees to arrange funding. See Note 8 for discussion of warrants.

On May 29, 2013, the Company entered into a professional services agreement. The agreement requires the Company to pay $25,000 per month in exchange for marketing and advertising services. The agreement terminates on December 31, 2014 but is cancellable at any time.

On August 1, 2013, the Company entered into a professional services agreement. In connection with the agreement, the Company issued 150,000 warrants to purchase common stock at an exercise price of $1.00 per share with a term of 3 years in exchange for professional services. As of September 30, 2013, all warrants were exercisable. This agreement also requires the Company to pay $7,500 in cash per month for 12 months in exchange for sales and marketing services. The agreement terminates on July 31, 2014 but is cancellable after the first six months.

Operating Leases and Service Contracts

The Company rents its facilities on a month-to-month or quarter-to-quarter basis. Most of its service contracts are also on a month-to-month basis. As of September 30, 2013, future minimum lease and non-cancelable services contract payments are as follows for the remainder of 2013 and thereafter:

2013		42,105
2014		14,405
2015		-
2016		-
2017		-
Thereafter		-
	$	56,510

Change in Officers and Employment Agreements

On March 5, 2013 Maksym Ilin was appointed as President, Principal Executive Officer and Vice President-Operations and Customer Service. Pursuant to a non-written agreement, Mr. Ilin will receive a base salary of $38,400 per year along with performance based bonuses. Previously, Mr. Ilin served as the Company’s Director of Customer Service. On August 15, 2013, upon the appointment of Jonathan M. Strimling, as the Company’s Chief Executive Officer, the Company’s Board of Directors removed Mr. Ilin as the Company’s President and Principal Executive Officer. Mr. Illin continues to serve as the Company’s Vice President-Operations and Customer Service.

On March 5, 2013, Ruslan Bondariev was appointed as Chief Technology Officer and Vice President – Research. Pursuant to a non-written agreement, Mr. Bondariev will receive a base salary of $36,000 per year along with performance based bonuses. Previously, Mr. Bondarev served as the Company’s Director of Research and Development.

On March 5, 2013, Alena Chuprakova was appointed as Comptroller, Treasurer and Principal Financial Officer. Pursuant to a non-written agreement, Ms. Chuprakova will receive a base salary of $50,000 per year, along with performance based bonuses.

On April 1, 2013, Brad Harkavy and Mark S. Dailey resigned as members of the board of directors.

On August 15, 2013, Jonathan M. Strimling was appointed as Chief Executive Officer. Pursuant to a written agreement, Mr. Strimling will receive a base salary of $180,000 per year along with quarterly performance based bonus compensation, other event based bonus compensation, and an option to purchase up to 1,493,449 shares of the Company’s common stock at the strike price of $1.00 per share. The options vest monthly over a four year period in equal installments of 31,113 shares per month beginning August 15, 2013, except that during the final month of vesting 31,138 shares shall vest. All of the options expire on August 14, 2023. The option grant was made pursuant to the Company’s 2010 Employee Stock Plan.

On September 18, 2013, Yvonne Gaudette was appointed as Vice President of Marketing. As the Company’s Vice President of Marketing, pursuant to a written agreement, Ms. Gaudette will receive a base salary of $110,000 per year, along with quarterly performance based bonus compensation and an option to purchase up to 125,000 shares of the Company’s common stock at the strike price of $1.03 per share. The options vest over a period of four years with 25% of the option shares vesting on September 18, 2014 and the remaining 75% of the option shares vest on an equal monthly basis thereafter. All of the options expire on September 17, 2023. The option grant was made pursuant to the Company’s 2010 Employee Stock Plan.

On September 25, 2013, Paul Parisi was appointed as Vice President of Innovation.  As the Company’s Vice President of Innovation, pursuant to a written agreement, Mr. Parisi will receive a base salary of $70,000 per year, along with quarterly performance based bonus compensation and an option to purchase up to 150,000 shares of the Company’s common stock at the strike price of $1.11 per share. The options vest in two tranches as follows: (i) 75,000 shares vest over a period of four years following the commencement of part-time employment (the Initial Option shares”) whereby 25% of the Initial Option Shares will vest on September 25, 2014 and the remaining 75% of the Initial Option Shares vest on a monthly basis thereafter; (ii) and 75,000 shares vest over the four years following the commencement of full time employment, if that event occurs (the "Second Option Shares"), whereby 25% of the Second Option Shares vest on the first anniversary of the date of the start of full time employment and the remaining 75% of the Second Option Shares vest on a monthly basis thereafter. All of the options expire on September 24, 2023. The option grant was made pursuant to the Company’s 2010 Employee Stock Plan.

Note 9: Commitments and Contingencies

Litigation

The Company may from time to time be involved in legal proceedings arising from the normal course of business. There are no pending or threatened legal proceedings as of December 31, 2012.

Operating Leases and Service Contracts

The Company rents its facilities on a month-to-month or quarter-to-quarter basis. Most of its service contracts are also on a month-to-month basis. However, the Company entered into several non-cancelable service contracts during the year ended December 31, 2012.  Future minimum payments under non-cancelable service contracts are as follows for the years ended December 31:

2013		143,420
2014		6,905
2015		-
2016		-
2017		-
Thereafter		-
Total	$	150,325

Changes in Officers and Employment Agreements

On April 30, 2012, Mr. William Morrison resigned as the Vice President of Engineering of the Company. As a result of his departure, Mr. Morrison also resigned as an officer of the Company. Mr. Morrison did not receive any severance as part of his resignation. Of the 100,000 options granted on January 26, 2011, 25,000 vested and 75,000 remained unvested and were forfeited.

On June 13, 2012, Mr. Semyon Dukach, the Company’s Chief Executive Officer resigned, and on that same date the Company’s board of directors appointed Richard T. Harrison to the position of Chief Executive Officer. Mr. Harrison received as compensation, among other things, a base salary of $100,000 per year, along with quarterly performance based bonuses. Mr. Harrison’s employment agreement was effective June 1, 2012.

On June 13, 2012 the Company’s board of directors re-appointed Mr. Semyon Dukach to the position of Chair of the Board of Directors, which was an executive position with the Company, effective June 13, 2012. Mr. Dukach receives no compensation for serving as the registrant’s Chair of the Board of Directors and his existing oral employment agreement and annual salary of $100,000 per year was terminated, except that Mr. Dukach is entitled to reimbursement of reasonable business expenses in accordance with the registrant’s corporate policy and any health benefits the registrant offers its other employees.

On August 15, 2012, Richard T. Harrison resigned as the chief executive officer and all other positions he held with the registrant. On that same date, the registrant’s board of directors appointed a committee to oversee the registrant’s operations, lead by Semyon Dukach, the registrant’s Chair of the Board of Directors. Mr. Harrison received a severance in the amount of $33,333, the equivalent of four months base salary paid ratably over a four month period according to the Company’s standard payroll schedule and health insurance benefits over a four month period. Of the 960,000 options granted on July 1, 2010, 563,333 vested and 396,667 remain unvested and were forfeited.

Consulting Services

On March 23, 2011, in relation to the agreement entered into with a third party to provide various consulting services for the Company, the Company issued 800,000 warrants to purchase common stock at an exercise price of $0.625 per share with a term of 5 years. See Note 8 for discussion of warrants.

On May 9, 2012, the warrant to purchase 800,000 shares of common stock at an exercise price of $.625 per share was exercised with total proceeds to the Company of $500,000.

On October 18, 2012, the Company entered into a professional services agreement. The agreement requires the Company to pay a monthly cash retainer of $12,500 to cover professional services provided by the service provider. Additionally, any service that exceeds the $12,500 retainer are to be paid through issuances of the Company’s common stock with a vesting schedule of six months from delivery date. At December 31, 2012, the Company has an accrued liability of $25,000, which is expected to be settled in shares of the Company’s common stock.

On October 29, 2012, the Company entered into a professional services agreement. In connection with the agreement, the Company issued 454,863 warrants to purchase common stock at an exercise price of $0.98 per share with a term of 5 years in exchange for professional services. As of December 31, 2012, 227,433 of such warrants were exercisable. The agreement also call for certain incentives that if achieved call for the disbursement of $500,000 or more depending on the size of transaction as well as fees to arrange funding. See Note 7 for discussion of warrants.