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10. Stockholders Deficit | 15 Months Ended
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Mar. 31, 2014
Equity [Abstract] |
10. Stockholders Deficit | Note 10 Stockholders Deficit (A) Common Stock In 2013, the Company issued the following common stock:
Transaction Type |  |  |  | Quantity |  | Valuation |  | Range of Value per Share
Warrants exercised |  |  | (1 | ) |  |  | 1,400,000 |  |  | $ | 1,400 |  |  | $ | 0.001 |
Services rendered - related party |  |  | (2 | ) |  |  | 500,000 |  |  |  | 125,000 |  |  |  | 0.25 |
Acquisition of 4.5% interest in subsidiary |  |  | (3 | ) |  |  | 1,467,000 |  |  |  | 366,750 |  |  |  | 0.25 |
|  |  |  |  |  |  | 3,367,000 |  |  | $ | 493,150 |  |  | $ | 0.001 |  |  | - |  | $0.250
The fair value of stock issued was based upon the following:
• |  | Warrants were exercised for cash under the terms of the agreement at $0.001 per share.
• |  | Services rendered – related party were based upon recent third party cash issuances of convertible debt with a conversion price of $0.25/share. This represented the best evidence of fair value.
• |  | Acquisition of 4.5% ownership in Subsidiary is deemed a capital transaction since control of the Subsidiary was never lost. Valuation was based upon recent third party cash issuances of convertible debt with a conversion price of $0.25/share. This represented the best evidence of fair value. See #3 below for additional discussion.
The following is a more detailed description of some of the Company’s stock issuances from the table above: (1) Warrants Exercised for Cash In connection with a warrant exercise, a third party paid cash to obtain these shares. (2) Services Rendered – Related Party The Company’s Chief Executive Officer received these shares as a sign on bonus. There are no future service requirements and there are no claw back or forfeiture rights associated with this stock grant. The shares are valued based on a recent third party cash offering of convertible debt containing an exercise price of $0.25/share. Also see Note 11. (3) Acquisition of Subsidiary Ownership Interest In June 2013, the Company reacquired 4.5% ownership in its subsidiary, which it had previously sold in 2012. The transaction was accounted for as a capital transaction since the parent had control of the Subsidiary at all times. The purchase reflected 4.5% of the Subsidiary being reacquired, which increased the parent’s ownership from 94.35% to 98.8%. The transaction included the valuation of shares issued at $366,750, however, in connection with establishing the valuation adjustment of the noncontrolling interest reacquired, $19,538 represented the net increase to additional paid in capital and reduction of the noncontrolling interest. As a result of this transaction, the noncontrolling interest post repurchase is 1.2%. (B) Additional Paid in Capital and Other Equity Transactions The following transactions occurred during the year ended December 31, 2013: (1) Debt Forgiveness – Related Parties Certain existing note holders forgave $83,000. There was no gain or loss on the transaction, rather a charge to additional paid in capital due to being a related party transaction. (2) Modification of Debt (Extinguishment Accounting) A board member and third party agreed to convert an aggregate $244,133 of outstanding conventional debt and accrued interest into convertible debt, under the same terms as the $2,000,000 convertible debt offering occurring in November 2013. The exchange of an outstanding debt instrument for a new debt instrument with the same lender/creditor results in an extinguishment of the old debt instrument if the debt instruments have substantially different terms. Similarly, a modification of the terms of an outstanding debt instrument should be accounted for like, and reported in the same manner as, an extinguishment if the old and new debt instruments have substantially different terms. In addition, the new debt instrument is considered to be substantially different from the old if the modification or exchange eliminates or adds a substantive conversion option. As a result, the Company determined a loss on debt extinguishment of $16,009. Of the total loss, $12,731 was recorded to the statement of operations pertaining to a third party; the remaining $3,278 could not be recorded as a loss to the statement of operations due to being a related party transaction, rather, the Company accounted for this loss on extinguishment as a capital transaction and recorded this amount as additional paid in capital. (3) Payment of Corporate Expenses by Stockholders Existing stockholders transferred shares owned in the Company to pay corporate expenses. The services had a fair value of $562,500, based upon recent third party convertible debt (November 2013 offering) that was sold having a conversion price of $0.25/share. The following transactions occurred during the year ended December 31, 2012: Sale of Member Units Prior to converting to a C Corp (see Note 1), the Subsidiary sold member units for $774,000. The sale reflected 4.5% of the subsidiary being sold, which reduced the parent’s ownership from 98.8% to 94.35%. The transaction was accounted for as a capital transaction since the parent had control of the Subsidiary at all times. The sale resulted in an allocation to the noncontrolling interest valued at $5,193. (C) Stock Options On September 3, 2013, the Company issued 300,000 stock options, having a fair value of $66,785, which was expensed immediately since all stock options vested immediately. These options expire on September 2, 2018 (5 years). All options were granted to Board Directors for services rendered, and included as a component of general and administrative expense, as a result, these grants were considered related party transactions. Of the total options granted, 100,000 were cancelled in 2014 as a Board Director resigned. The Company applied fair value accounting for all share based payment awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes assumptions used in the year ended December 31, 2013 is as follows:
Options Granted |  |  | 300,000 |
Grant Date |  |  | September 3, 2013 |
Exercise Price |  | $ | 0.375 |
Expected Dividends |  |  | 0 | %
Expected Volatility |  |  | 150 | %
Risk Free Interest Rate |  |  | 0.03 | %
Expected Life of Options |  |  | 5 Years |
Expected Forfeitures |  |  | 0 | %
Fair Value per Stock Option |  | $ | 0.22 |
The following is a summary of the Company’s stock option activity:
|  |  |  |  |  | Weighted Average |  | Aggregate
|  |  |  | Weighted Average |  | Remaining Contractual Life |  | Intrinsic
|  | Options |  | Exercise Price |  | (In Years) |  | Value
Balance - December 31, 2012 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Granted |  |  | 300,000 |  |  |  | 0.375 |  |  |  | 5.00 |  |  |  | — |
Exercised |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Forfeited/Cancelled |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balance - December 31, 2013 - outstanding |  |  | 300,000 |  |  |  | 0.375 |  |  |  | 4.67 |  |  |  | — |
Balance - December 31, 2013 - exercisable |  |  | 300,000 |  |  |  | 0.375 |  |  |  | 4.67 |  |  |  | — |
Grant date fair value of options - 2013 |  |  | 66,458 |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average grant date fair value - 2013 |  |  | 0.22 |  |  |  |  |  |  |  |  |  |  |  |  |
(D) Stock Warrants All warrants issued during 2013 were accounted for as derivative liabilities as the warrants contained a ratchet feature. See Note 6. During 2013, the Company issued 6,738,884 warrants. Of the total warrants granted, 4,338,884 expire 5 years from issuance, while 2,400,000 expired on December 31, 2013. Of the total warrants granted, 6,614,801 were granted to third parties, while 124,083 were granted to related parties, consisting of the Company’s Chief Executive Officer. During 2013, the Company entered into convertible, secured note agreements. As part of these agreements, the Company issued warrants to purchase 3,672,134 shares of common stock. The warrants vest immediately and expire November 26, 2018, with an exercise price of $0.375. During 2013, the Company issued 3,066,750 warrants for services performed. The warrants vest immediately and expire on December 31, 2013 through November 25, 2018, with exercise prices ranging from $0.001 - $0.375. The value of the warrants granted for services was $682,809 and was calculated using the below Black-Scholes assumptions below, and was expensed as derivative expense with the offset being recorded to derivative liabilities, since the Company applied the provisions of ASC No. 815, pertaining to the potential settlement in an amount of shares that may not currently exist to settle any potential exercises. Of the total expense, $666,315 was to third parties, while the remaining $16,495 was to related parties. The Black-Scholes assumptions used in the computation of derivative expense for year ended December 31, 2013 is as follows:
Stock price |  | $ | 0.25 |
Exercise price |  | $ | 0.38 |
Expected dividends |  |  | 0 | %
Expected volatility |  |  | 150 | %
Risk free interest rate |  |  | 1.68 | %
Expected term |  |  | 5 years |
A summary of warrant activity for the Company for the year ended December 31, 2013 is as follows:
|  | Number of Warrants |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (in Years) |  | Aggregate Intrinsic Value
Balance - December 31, 2012 |  |  |  |  |  | $ | — |  |  |  |  |  |  |  |  |
Granted |  |  | 6,738,884 |  |  |  | 0.24 |  |  |  | 5.00 |  |  |  |  |
Exercised |  |  | (1,400,000 | ) |  |  | 0.001 |  |  |  | — |  |  |  |  |
Cancelled/Forfeited |  |  | (1,000,000 | ) |  |  | 0.001 |  |  |  | — |  |  |  |  |
Balance - December 31, 2013 |  |  | 4,338,884 |  |  | $ | 0.24 |  |  |  | 4.87 |  |  | $ | — |
All warrants are exercisable and fully vested on the grant date. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
In April 2014, the Company received $1,000 in connection with a warrant exercise of 1,000,000 warrants that had been assigned from one investor (originally held 2,400,000 and exercised 1,400,000 in 2013). There is was no additional compensation expense recorded on this transaction.

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(d),(e)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SAB TOPIC 4.C) -URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187143-122770 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.29-31) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 4.E) -URI http://asc.fasb.org/extlink&oid=27010918&loc=d3e74512-122707 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section C Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Article 4 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Preferred Stock -URI http://asc.fasb.org/extlink&oid=6521494 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph d -Article 4 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656 + Details
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