EQUITY

12 Months Ended

Dec. 31, 2012

EQUITY [Abstract]

EQUITY

NOTE 12–EQUITY

COMMON STOCK ISSUED FOR SERVICES IN 2011

In 2011, the Board of Directors approved a grant of 35,000 shares of common stock to each of the Company's four external directors.  A tax gross up of up to 35% was included, not to exceed $10,000.  140,000 shares were granted on January 6, 2011, with a fair market value of $141,400, based on the closing price of stock on the grant date.

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 $109,200 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 provided, that either party may 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.  The Company terminated the Agreement with Alliance Advisors, LLC on January 12, 2012.  The Company expensed half the value of the shares equal to $54,600 related to the agreement and received the remaining 42,000 shares back in 2012. 

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 provided that should either party terminate this agreement, AIM shall be entitled to keep all vested a shares as of the date of termination, plus any pro rata amount of shares based on the termination date.

As of December 31, 2011, 100,000 shares of common stock owed to AIM had vested.  These shares were valued on their respective vesting dates for a total of $138,750.  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.  On January 7, 2012, the remaining 25,000 shares were valued and expensed for $11,250.

On February 9, 2011, the Company entered into an Investment Banking Agreement with Legend Securities, Inc. ("Legend"), pursuant to which Legend agreed to provide business advisory services to us for a period of up to twelve months. In exchange for Legend's services, we agreed to pay Legend the sum of $10,000 per month and to issue Legend a onetime fee of 350,000 shares of Common Stock. Per the agreement, the shares would be issued as follows: 87,500 1 day after the effective date of the agreement, 87,500 90 days after the effective date, 87,500 180 days after the effective date and 87,500 270 days after the effective date.  Therefore, as of December 31, 2011, the Company issued 350,000 shares of common stock valued at $408,625 based on the closing prices on the measurement dates. 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 FOR SERVICES IN 2012

On February 6, 2012 the Company issued 238,800 shares of common stock to its four 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.

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 terminated on 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 the agreement, as well as $10,000 per month for the duration of this agreement. An additional 350,000 shares of Common Stock would have been issued to Maxim upon the completion of a closing that resulted in the Company receiving a minimum of $10 million. No such transaction occurred prior to the termination of the agreement.

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 FOR DEBT CONVERSION

On January 15, 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.

On April 19, 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.

On November 5, 2012, the Company issued 212,056 shares of its Common Stock, $.00005 par value per share, upon conversion to common stock of its Notes, representing principal of $200,000 and interest of $12,056.  The conversion was in accordance with the agreement, and therefore no gain or loss was recorded.

COMMON STOCK ISSUED ON THE EXERCISE OF WARRANTS

During 2012, 490,424 stock warrants were exercised for cash of $304,225.

During 2011, 56,489 stock warrants were exercised for cash of $3,353.

COMMON STOCK ISSUED ON THE CASHLESS EXERCISE OF WARRANTS

During 2012, the Company issued 198,663 shares of common stock on the cashless exercise of warrants.

During 2011, the Company issued no shares of common stock on the cashless exercise of warrants.

COMMON STOCK ISSUED ON THE EXERCISE OF STOCK OPTIONS

During 2012, 14,600 stock options were exercised for cash of $9,526.

During 2011, no stock options were exercised for cash.

COMMON STOCK ISSUED ON THE CASHLESS EXERCISE OF STOCK OPTIONS

During 2012, the Company issued 131,161 shares of common stock on the cashless exercise of options.

During 2011, no stock options were exercised on a cashless basis.

COMMON STOCK PAYABLE

On February 12, 2013, we entered into a settlement agreement with a former provider of investment services over compensation provided in a prior period for services in the raising of equity capital for the Company.  As a result of this agreement, the Company issued 875,000 shares of Common Stock to this party.  As of December 31, 2012, the Company has recorded a common stock payable in the amount of $1,881,250 which is equal to the value of the shares on the settlement date.

CONVERTIBLE PREFERRED STOCK

As indicated previously, on August 13, 2012, the Company entered into a modification with Brightline pursuant to which Brightline agreed to convert preferred stock into common stock on or before the respective maturity.  As a result of this modification the Convertible, Redeemable Preferred Stock Series II has been reclassified to equity as Convertible Preferred Stock Series II as of December 31, 2012 as the shares are no longer redeemable.