EQUITY

9 Months Ended

Sep. 30, 2012

EQUITY [Abstract]

EQUITY

NOTE 12 – EQUITY

Common Stock Issued from Private Placements

On February 23, 2012, we entered into a private placement subscription agreement with Brightline Ventures I-B, LLC, pursuant to which we sold 311,545 shares of Common Stock, for a price of $1.50 per share and received gross proceeds of $467,318.

On March 29, 2012, we entered into a private placement subscription agreement with Brightline Ventures I-B, LLC, pursuant to which we sold 437,380 shares of Common Stock, for a price of $1.50 per share and received gross proceeds of $656,070.

On May 8, 2012, we entered into a private placement subscription agreement with Brightline Ventures I-B, LLC, pursuant to which we sold 744,711 shares of Common Stock, for a price of $1.50 per share and received gross proceeds of $1,117,067.

On August 1, 2012, we entered into a private placement subscription agreement with Brightline Ventures I-B, LLC,  pursuant to which we sold 417,612 shares of Common Stock, for a price of $1.50 per share and received gross proceeds of $626,417.

On September 10, 2012, we entered into a private placement subscription agreement with Brightline Ventures I-B, LLC, pursuant to which we sold 74,200 shares of Common Stock, for a price of $1.50 per share and received gross proceeds of $111,300.

Common Stock Issued from Conversion of Preferred Stock

On August 15, 2012, Brightline converted $907,120 (including accrued dividends) of Series I Redeemable Preferred Stock into 907,120 shares of the Company's Common Stock.  In conjunction with this conversion,  Morris Garfinkle, a Director of the Company, also converted $34,800 (including accrued dividends) of Series I Redeemable Preferred Stock into 34,800 shares of the Company's Common Stock.

In addition, on September 7, 2012, Brightline converted $727,280 (including accrued dividends) of Series I Redeemable Preferred Stock into 727,280 shares of the Company's Common Stock.

Common Stock Issued from the Exercise of Stock Options  on a Cash/Cashless Basis

For the three months ended March 31, 2012, no options were exercised for cash.

During the three months ended June 30, 2012, an employee of the Company purchased 2,500 shares of Common Stock pursuant to the Stock Option Plan at $0.65 per share.  Gross proceeds received by the Company were $1,625.

During the three months ended September 30, 2012, current and former employees purchased shares of Common Stock pursuant to the Stock Option Plan at amounts between $0.65 and $1.01 per share.  The cash exercise of these options was for 12,100 shares of Common Stock and the company received gross proceeds of $7,901.

During the first and second quarters of 2012, there were no stock options exercised on a cashless basis.

During the three months ended September 30, 2012, a former employee exercised options on a cashless basis and acquired 12,172 shares of Common Stock.

For the nine months ended September 30, 2011, there were no stock options exercised on a cash or cashless basis.

Common Stock Issued on Converted Notes

During the first quarter of 2012, the Company issued 1,508,000 shares of its Common Stock, $.00005 par value per share, upon conversion to common stock of  its 8% Convertible Secured Notes due in 2012 (the "Notes"), representing principal of $1,300,000 and interest of $208,000.  The conversion was in accordance with the agreement, and therefore no gain or loss was recorded.

During the second quarter of 2012, the Company issued 150,979 shares of its Common Stock, $.00005 par value per share, upon conversion to common stock of its Notes, representing principal of $120,000 and interest of $30,979.  The conversion was in accordance with the agreement, and therefore no gain or loss was recorded.

Common Stock Issued to Directors

On February 6, 2012 the Company issued 238,800 shares of common stock to four of its non-executive directors (59,700 each) – Mark Hershhorn, Brian Israel, Morris Garfinkle and Edward Smith III. The Company recognized a total of expense of $160,000 related to these issuances.  These shares were valued based on the closing price of the grant date.

Common Stock Issued for Services

On July 2, 2012, we entered into a Private Placement of Securities & Advisory Services Agreement with Maxim Group LLC, pursuant to which Maxim agreed to act as the Company's exclusive placement agent in a proposed private placement of equity, convertible, debt and/or linked securities of the Company up to $10 million.  This agreement will remain in effect until December 31, 2012.

In exchange for Maxim's services, we agreed to pay Maxim with 150,000 shares of the Company's Common Stock  valued at $150,000 for purposes of this agreement, as well as $10,000 per month for the duration of this agreement.  An additional 350,000 shares of Common Stock would be issued to Maxim upon the completion of a closing that results in the Company receiving a minimum of $10 million.  Also, the Company would grant to Maxim securities purchase warrants (the "Warrants") covering 8% of the total number of Securities sold and/or issued in an Offering.  The Warrants would be nonexercisable for six months after the Closing date and will expire five years after the Closing.  The Warrants would be exercisable at a price per share equal to 110% of the price of the Securities paid by investors in connection with the Offering. The Maxim Warrants contain a cashless exercise provision and certain "piggy-back" registration rights, pursuant to which the Company is obligated to register the shares underlying the Maxim Warrants under the Securities Act of 1933, as amended (the "Securities Act"), in any future registration statement that is filed by the Company with the U.S. Securities and Exchange Commission.

On August 22, 2011, the Company entered into an Agreement for Services with Alliance Advisors, LLC, pursuant to which Alliance agreed to provide investor relations services to us for a period of twelve months.  In exchange for Alliance's services, we agreed to pay Alliance 84,000 restricted shares of common stock valued at $12,600 for purposes of the agreement, as well as $6,500 per month for the first six months, and $7,500 per month for the second six months of the agreement.  The agreement provides, that either party has the right to terminate the agreement after 6 months, and in the event of such termination, a pro rata portion of the 84,000 shares of common stock would be returned to the Company.  On May 10, 2012 the Company terminated the agreement and requested Alliance to return 42,000 of the restricted shares.  Alliance agreed to these stipulations and returned such shares on May 15, 2012.  The initial 42,000 vested shares were expensed in the prior year.

On April 12, 2011, the Company entered into an Agreement for Services with AIM Capital Corporation, pursuant to which AIM agreed to provide public relations services to us for a period of twelve months. In exchange for AIM's services, we agreed to pay Aim an annual fee of 125,000 shares of common stock which vest as follows: 50,000 upon execution of agreement, 25,000 on the 90th day following this agreement, 25,000 on the 180th day following this agreement, and 25,000 on the 270th day following this agreement. The agreement also provides that should either party terminate this agreement, AIM shall be entitled to keep all vested shares as of the date of termination, plus any pro rata amount of shares based on the termination date.  As of June 30, 2012 all shares have vested to the benefit of AIM.  During the nine months ended September 30, 2012 the Company recognized an expense of $11,250 for the remaining vested shares.

We also entered into registration rights agreements pursuant to which we have agreed to file with the Securities and Exchange Commission a registration statement covering the resale of the Common Stock underlying the issuance above. This registration statement was filed on June 2, 2011, and went effective on June 3, 2011.

We determined that all of the securities issued pursuant to the agreement were exempt from registration under the Securities Act of 1933, as amended (the "Act") pursuant to Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the Act. We based this determination on the non-public manner in which we offered the securities and on the representations of the persons purchasing such securities, which included, in pertinent part, that such persons were "accredited investors" within the meaning of Rule 501 of Regulation D promulgated under the Act, and that such persons were acquiring such securities for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to resale or distribution, and that each such person understood such securities may not be sold or otherwise disposed of without registration under the Act or an applicable exemption therefrom.

Common Stock Issued from the Exercise of  Warrants on a Cash/Cashless Basis

During the first and second quarters of 2012, there were no warrants exercised for cash.

For the three months ended September 30, 2012, 390,923 warrants were exercised and the company received gross proceeds of $163,820.

For the nine months ended September 30, 2011, 56,489 warrants were exercised and the company received gross proceeds of $3,354.

We have not issued any shares of Common Stock on the cashless exercise of warrants during the first and second quarters of 2012.

During the three months ended September 30, 2012, 111,002 shares of Common Stock were issued due to the cashless exercise of warrants.

For the nine months ended September 30, 2011 no shares of Common Stock were issued on the cashless exercise of warrants.