9 - Common and Preferred Stock

9 Months Ended

Sep. 30, 2012

Schedule of Stock by Class [Table Text Block]

9 — Common and Preferred Stock

Preferred Stock - The Company’s Amended and Restated Articles of Incorporation authorize 10,000,000 shares of preferred stock, par value $0.001 per share. On November 19, 2009, the Company filed a Certificate of Designation (“C.D.”) and designated a Series A preferred stock by resolution of the board of directors.  The C.D. authorized the sale of 250,000 shares of Series A preferred stock at $1.00 per share, with additional rights, preferences, restrictions and privileges as filed with the Nevada Secretary of State. As of September 30, 2012 and December 31, 2011, 25,000 shares of Series A Preferred stock were issued and outstanding at $1.00 per share to a stockholder and secured note holder.

On October 12, 2012, the Company filed a C.D. and designated a Series A2 preferred stock authorizing the sale of 1,000,000 non-voting shares of Series A2 preferred stock at $1.00 per share. The shares generally may be redeemed by the Company for $1.25 per share plus payment of any accrued but unpaid dividends.  Also on October 12, 2012, the Company sold 297,103 shares of Series A2 preferred stock together with warrants to purchase 297,103 shares of common stock at an exercise price of $0.20 per share in exchange for a total purchase price of $297,103. The securities were sold to accredited investors in a private placement exempt from registration under Regulation D of the Securities Act of 1933, as amended. The Series A2 preferred stock may be converted into shares of common stock at a conversion rate of 6.66 shares of common stock for each share of Series A2 preferred.  The value associated with the Series A2 warrants is $6,000 and will be recorded as interest expense. The warrants are valued using the Black-Scholes formula.

Common Stock - As of September 30, 2012 and December 31, 2011, the total number of authorized shares of common stock, par value $0.001 per share, was 150,000,000 of which 70,262,798 and 74,352,728 shares, respectively, were issued and outstanding.  In the first quarter of 2012 the Company cancelled 4,089,930 shares of its common stock pursuant to the settlement of a lawsuit with a former shareholder (See Note 12). Subsequent to September 30, 2012 the Company converted certain secured note holder loan balances to 10,145,523 shares of common stock (see Note 7).