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CAPITAL STOCK

12 Months Ended

Dec. 31, 2013

Authorized

The Company is authorized to issue 200,000,000 shares of preferred stock, having a par value of $0.0001 per share, and 300,000,000 shares of common stock, having a par value of $0.00003 per share.

Forward Stock Split and Authorized Capital Stock

Effective September 15, 2011, by Articles of Amendment, the Company effected the following changes:

(1)	forward split all outstanding shares of the Corporation’s common stock on a 3 for 1 basis. Accordingly, common share disclosure has been presented on a post split basis, except where noted.

(2)

increased authorized capital stock to 500,000,000 shares, of which 300,000,000 shares shall be common stock, par value $0.00003, and 200,000,000 shares shall be preferred stock, par value $0.0001, and to give the Board of Directors the power to fix by resolution the rights, preferences and privileges of preferred stock.

On October 5, 2011, by approval of shareholders of the Company and the Florida Secretary of State, the authorized number of Series A Convertible Preferred Stock was changed to 50,000,000 shares from the previously authorized 200,000,000 shares of preferred stock. The Certificate of Designation for these shares provides among other rights and privileges the requirement that 75% of the outstanding Series A Convertible Preferred must give their prior consent, before the Company can elect members to the Board of Directors, issue any securities of the Company or affect any fundamental transaction (defined as acquisitions, mergers, sale or purchase of substantially all assets, etc.). The Company effectuated these amendments during the fourth fiscal quarter of 2011.

The shareholders of convertible preferred stock are voted equally with the shares of the Company’s common stock. Each share of the convertible preferred stock is convertible into two fully paid and non-assessable shares of common stock, subject to certain adjustments, as follows:

(i)	During the period commencing on October 10, 2013 and terminating on October 10, 2015 (“the quarterly conversion period”), each holder of convertible preferred stock may elect to convert, on each March 31, June 30, September 30 and December 31 occurring during the quarterly conversion period, that number of shares of convertible preferred stock equal to 25% of the total number of shares of convertible preferred stock initially issued to such Holder into full paid and non-assessable shares of common stock; and

(ii)	After the quarterly conversion period, each Holder may elect to convert all or any portion of its shares of convertible preferred stock then outstanding into full paid and non-assessable shares of common stock.

(iii)

At any time after the issue date and while the convertible preferred stock are outstanding, the Company sells or grants any option to purchase or otherwise disposes or issues any common stock and/or common stock equivalents entitling any person to acquire shares of common stock at a price per share that is lower than $2.50 (such issuances, collectively, then the Company is required to issue additional shares of preferred shares “Dilutive Issuance”), based on the ratio of the number of shares of common stock and equivalents divided by the number of shares of common stock prior to the dilutive issuance, times the number of shares of preferred stock prior to the dilutive issuance. Each preferred stock shareholder is entitled to receive a pro rate portion of the dilutive issuance based on the number of its shares of preferred stock held prior to the dilutive issuance.

Issued and Outstanding

Preferred Stock

At December 31, 2013 and 2012, shares of preferred stock issued and outstanding totaled -0- and 8,811, respectively.

On September 13, 2012, the Company issued a total of 386 shares of series A convertible preferred stock, at par value of $0.0001 per share, to two directors of the Company, with each receiving 193 shares, in conjunction with the execution and completion of certain contract provisions related to the R.F.B., LLC agreement.

On October 2, 2012, the Company issued a total of 1,537 shares of series A convertible preferred stock, at par value of $0.0001 per share, to one director of the Company, in conjunction with the execution of the C.C Crawford Option Agreement.

During 2012, the Company issued 939 shares of preferred stock, at par value of $.0001 per share, for a dilutive issuance under the preferred share agreement, to the shareholders of preferred stock. Each preferred stock shareholder is entitled to receive a pro rate portion of the dilutive issuance based on the number of its shares of preferred stock held prior to the dilutive issuance.

During the year ended September 30, 2013, the Company issued 302 shares of preferred stock, at par value of $.0001 per share, for a dilutive issuance under the preferred share agreement to the shareholders of preferred stock. Each preferred stock shareholder is entitled to receive a pro rate portion of the dilutive issuance based on the number of its shares of preferred stock held prior to the dilutive issuance.

On September 30, 2013, the Company entered into a series of repurchasing agreements with each of the shareholders of its Series A Convertible Preferred Stock. The Company entered into the agreement to eliminate future dilutive issuance as a result the Company was able to reduce its convertible share exposure by 33% and eliminate 75% control held by the Series A Preferred Stock. In exchange for the agreement, each of the Series A Preferred Stock holders were issued common stock in the Company based on weighted average conversation rate of 67% of the conversion rate. As a result the Company issued 70,032 shares of common stocks at par value of $.00003 in exchange for the repurchase each of the Series A Preferred Stock.

Common Stock

At December 31, 2013 and 2012, shares of common stock issued and outstanding totaled 150,488 and 63,468, respectively.

During the year ended December 31, 2013, the Company issued 87,340 shares of common stock as follows:

On September 30, 2013, in conjunction with the repurchase agreements with the holders of the Series A Convertible Preferred Stock, Mr. Cronin exercised his warrants and those of TMDS at their strike price and 17,308 shares of common stock were issued for $298,300. The purchase price offset amounts due him under his line of credit and amount due under the contingent liability amount from the Company.

On September 30, 2013, the Company issued 70,032 shares of common stock under the repurchase agreements in exchange all of the outstanding Series A Convertible Preferred Stock.

Effective November 4, 2013, the Company received an affirmative vote by the shareholders for a reverse split of all the outstanding shares of the Company at a reverse split ratio of 1:1,300. No fractional shares were issued and cash was paid in lieu of the fractional shares. As a result of the fractional shares, outstanding shares were reduced by 320 post split shares.

During the year ended December 31, 2012, the Company issued 926 shares of common stock as follows:

On July 18, 2012, issued 469 shares to Key Services, Inc. (‘Key Services”), valued at $121,862, for settlement of accounts payable balance per amendment to Key Services’ consulting agreement;

On August 8, 2012, issued 192 shares to Heartland Capital Markets, LLC (“Heartland”), valued at $15,000, for corporate advisory services per amendment to Heartland’s corporate advisory services agreement;

On August 15, 2012, issued 96 shares to Undiscovered Equities, Inc. (“UEI”) valued at $17,500, for consulting services per amendment to UEI’s consulting agreement;

On September 13, 2012, issued 77 shares to R.F.B., LLC, (“RFB”), valued at $6,000, for acquisition of exclusive license by Company per RFB’s license and assignment agreement.

On December 31, issued 92 shares to outside contractor, valued at $12,673, under the outside contractor’s consulting agreement.

Stock Purchase Warrants

During the year ended December 31, 2012, the Company issued a total of six warrants for the purchase of 4,231shares of common stock with a total value of $570,000.

(1)

On January 17, 2012, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS, LLC ("TMDS"'), a company controlled by a director of the Company, as consideration for services rendered per a Contractor Agreement, dated July 9, 2011, and as further amended December 30, 2011. TMDS receives a warrant to purchase 769 shares of common stock every ninety days during the term of the Contractor Agreement for a total of five (5) years. The warrant is exercisable at $0.13 per share, and has term expiring on the fifth anniversary date from the date of each issuance. The fair value of the issued warrant is $70,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.79%, expected life of 5 years and expected volatility of 473.82%.

(2)

On March 17, 2012, the Company issued a warrant for the purchase of 385 shares of common stock, at an exercise price of $1.30 per share, exercisable after twelve months from issue date, with a term expiring on the fifth anniversary date from the date of issuance, to a departing Chief Financial Officer, who resigned effective March 14, 2012. The fair value of the issued warrant is $70,000, based on Black-Scholes option-pricing model using risk free interest rate of 1.13%, expected life of 5 years and expected volatility of 460.03%. The warrant was exercised in September 2013 under the cashless provision contained in the warrant.

(3)

On April 16, 2012, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 Shares every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $160,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.85%, expected life of 5 years and expected volatility of 481.39%.

(4)	On July 1, 2012, the Company issued a warrant share issuance for the purchase of 769 Shares of common stock (‘Warrant Shares’) to Joseph M. Danko, an independent contractor (“Contractor”), per a January 1, 2012 four year Stock Purchase Warrant Agreement that gives Contractor right to purchase 2,307 shares (“Warrant Shares”) of common stock, as consideration for services rendered per an Independent Contractor Agreement with the Company, effective January 1, 2012. The contractor is entitled to purchase 2,307 Warrant Shares as follows:

	769 Warrant Shares after the first year anniversary, at exercise price of $260.00 per share, with a term expiring on on January 1, 2016;

	769 Warrant Shares after the second the second anniversary and expiring on January 1, 2016;

	The fair value of the issued warrant is $100,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.67%, expected life of 4 years and expected volatility of 486.46%.
(5)	On July 15, 2012, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 Shares every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $80,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.62%, expected life of 5 years and expected volatility of 488.56%.

(6)	On October 13, 2012, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 shares of common stock every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $90,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.67%, expected life of 5 years and expected volatility of 547.10%.

During the year ended December 31, 2013, the Company issued a total of four warrants for the purchase of 3,077 shares of common stock with a total value of $140,000. The following discusses the issuance of warrants during 2013:

On January 1, 2013, the Company incurred a warrant share issuance for the purchase of 769 Shares of common stock (‘Warrant Shares’) by an independent contractor (“Contractor”), per a January 1, 2012 Stock Purchase Warrant Agreement that gives Contractor right to purchase 769 shares (“Warrant Shares”) of common stock, after the first anniversary at exercise price of $260.00 per share, as discussed above. The fair value of the issued warrant is $60,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.72%, expected life of 4 years and expected volatility of 534.55%.

On January 11, 2013, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 shares of common stock every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $50,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.80%, expected life of 4 years and expected volatility of 529.81%.

On April 11, 2013, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 shares of common stock every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $20,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.74%, expected life of 4 years and expected volatility of 429.77%.

On July 15, 2013, the Company issued a warrant for the purchase of 769 shares of common stock to TMDS. As discussed above, TMDS receives a warrant to purchase 769 shares of common stock every ninety days during the term of the Contractor Agreement for a total of five (5) years. The fair value of the issued warrant is $10,000, based on Black-Scholes option-pricing model using risk free interest rate of 0.34%, expected life of 2 years and expected volatility of 420.04%.

On September 30, 2013, in conjunction with the repurchase agreements with the holders of the Series A Convertible Preferred Stock, Mr. Cronin exercised his warrants and those of TMDS at their strike price and 17,308 shares of common stock were issued for $298,800. The purchase price offset amounts due him under his line of credit and amount due under the contingent liability amount from the Company.

As of December 31, 2013 and 2012 were 1,538 and 15,769 warrants outstanding, respectively.

The following table summarizes the warrant activity for the years ended December 31, 2013 and 2012:

	Warrants Outstanding
				Weighted
				Average
	Number of			Exercise
	Shares			Price
Balance, December 31, 2011		11,538		$	25.79
Granted		4,231		$	23.85
Exercised		—			—
Expired/Cancelled		—		$	—
Balance, December 31, 2012		15,769		$	25.27
Granted		3,077		$	65.10
Exercised		(17,308	)		(17.26	)
Expired/Cancelled		—			—
Balance, December 31, 2013		1,538		$	195.00
Exercisable at December 31, 2013		1,538		$	195.00

The range of exercise prices and the weighted average exercise price and remaining weighted average life of the warrants outstanding at December 31, 2013 were $130.00 to 260.00, $195.00 and two years, respectively. The aggregate intrinsic value of the outstanding warrants at December 31, 2013 was $-0-.