Note 16. Warrants

Warrants

Warrants consist of the following as of June 30, 2013:

	Shares		Weighted average exercise price		Weighted average remaining contract term (years)
Warrants outstanding at January 1, 2013		-	$	-		-
Granted		4,150,000		0.58		4.75
Exercised		-		-		-
Forfeited or lapsed		-		-		-
Warrants outstanding at June 30, 2013		4,150,000	$	0.58		4.75

As of June 30, 2013, 4,150,000 warrants were classified as a derivative liability. For each reporting period the warrants will be revalued and reported as a change in fair value of derivative liabilities on the statements of income. For the quarter ended June 30, 2013 that revaluation was $0.3 million, The Company uses the Black Scholes Model to estimate the fair value the Warrants; however, because of the uncertainty regarding the ultimate exercise price of the warrants, the ultimate exercise price of the warrants was predicted based on 1) management’s expectation of future issuance of common stock and 2) Monte Carlo simulations to predict future stock prices and the extent of dilution based on management’s expectations.