RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2012

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 20 – RELATED PARTY TRANSACTIONS

In 2011,  the Company's external Directors, Mark Hershhorn, Morris Garfinkle, Brian Israel and Edward Smith each agreed to apply $15,000 of their Directors' fees (20% of which was past due), to the purchase of Units pursuant to the terms of the Preferred Stock Series I  offering as set forth in Note 9 hereinabove.

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 expense of $160,000 related to these issuances. These shares were valued based on the closing price of the grant date.

On August 15, 2012, Morris Garfinkle, a Director of the Company, converted $34,800 (including accrued dividends) of Series I Convertible, Redeemable Preferred Stock into 34,800 shares of the Company's Common Stock.

On December 11, 2012, the Company's external Directors, Mark Hershhorn, Morris Garfinkle, Brian Israel and Edward Smith each agreed to convert $17,403 (including accrued dividends) of Series I Convertible, Redeemable Preferred Stock into 17,403 shares of the Company's Common Stock prior to its maturity. The aggregate conversion by the directors was $69,612. As a result of this early conversion the Company recorded a loss of $728 for the twelve months ended December 31, 2012.

As of December 31, 2012 and 2011, the Company owed $0 and $1,500,855 to Brightline for convertible debt and accrued interest before considering the discount on this debt.

See also Notes 8, 9, 12 and 21 with respect to transactions involving our largest shareholder, Brightline Ventures I, LLC.