EQUITY BASED COMPENSATION FOR CONSULTING, LEGAL, AND OTHER PROFESSIONAL SERVICES

12 Months Ended

Dec. 31, 2012

Stock Issued For Consulting Legal and Other Professional Services [Abstract]

Stock Issued For Consulting Services [Text Block]

12. EQUITY BASED COMPENSATION FOR CONSULTING, LEGAL, AND OTHER PROFESSIONAL SERVICES

Equity based compensation as well as year-end bonuses (See Note 23. SUBSEQUENT EVENTS) for consulting, legal, and other professional services is presented on the face of the statement of stockholders’ deficit for the years ended December 31, 2012, and 2011. More information on the significant components of the amounts presented follows:

Pursuant to a consulting agreement for business advisory services, the Company issued or declared payable for the years ended December 31, 2012, and 2011, 35,715,082, and 3,402,568 shares, respectively, for $62,253 and $38,100 services, respectively. The stock conversion price under the agreement is calculated as a weighted average for the month the services were granted at a 30% discount. The brother of this consultant performed engineering services under the same terms and conditions of the agreement and the Company issued 62,523 restricted shares and recorded operating expense or $2,571 for year ended December 31, 2012. Up until the end of the first quarter 2012, operating expense was recorded at invoice value due to nominal trading volume.

However, beginning in the second quarter of 2012, operating expense was recorded based on full weighted average share price of the market for the period in which the services were rendered.

On June 30, 2012, the Company declared payable 210,526 shares of restricted stock to satisfy a $1,000 invoice based on a 50% discount of the weighted average share price for the period in which services were performed. However, the Company recorded $2,000 as operating expense based on the full weighted average share price of the market during which services were performed.

On May 18, 2012, the Company issued 101,492 restricted shares for business advisory and strategic services. The invoice amount was $3,400 and the number of shares issued was based on a 30% discount to market weighted average share price for period services were performed. However, the Company recorded operating expense at the full market weighted average share price for the period in which services were rendered, or $4,857.

On April 16, 2012, the Company issued 238,312 restricted shares for legal services. The invoice amount was $5,075 and shares were issued was based on a 30% discount to market weighted average share price for period services were performed. However, the Company recorded operating expense at the full market weighted average share price for the period in which services were rendered, or $7,250.

For the year ended December 31, 2012, the Company issued 4,896,599 restricted shares payable to a consultant for $76,745 engineering services. The number of shares was calculated based on the weighted average of shares outstanding for the period during which services were rendered at a 30% discount for services not covered by consulting agreement. For the first quarter of 2012, these incremental engineering services were recorded as operating expense at stated invoice amount due to nominal trading volume. However, in the second quarter of 2012, operating expense was recorded based on weighted average share price of the market for the period in which the services were rendered. The engineering services covered by a consulting agreement provided for 2,500,000 cumulative shares with a vesting schedule through December 31, 2012. These shares were recorded based on the closing stock price on the date of agreement. Shares will vest through December 31, 2012. As of December 31, 2012, the Company had issued all 2,500,000 shares of stock under this agreement according to the vesting schedule.

On February 2, 2012, the Company entered into a consulting agreement for financial and public relations services. The term of the agreement is for twelve (12) months and either party may cancel the agreement with 30 days written notice. Payment shall be monthly beginning in March 2012, in the form of $10,000 cash, or $20,000 worth of common stock based on the weighted average of the Company’s stock for the month at a 30% discount. Payment in cash or stock is at the option of the Company. In addition, upon signing of the agreement, the Company was to issue 2,500,000 shares for services previously provided during the first quarter of 2012. The Company recognized $29,750 operating expense under this agreement for the first quarter of 2012 and 5,277,778 shares payable. Due to the guarantee stock value clause in the Agreement, the Company compared the value at the time the stock was granted with the value at the end of the quarter, and determined there was no need for accrual of additional shares payable to achieve the $20,000 market value to guarantee. At June 30, 2012, this agreement and compensation under this agreement ceased. Accordingly, no expense related to this agreement was recorded beyond the first quarter of 2012.

On March, 31 2012, the Company declared $9,250 due for planning and funding advisory services payable in 1,389,077 shares of restricted stock based on 30% discount to weighted average market price for the period in which services were rendered. Due to nominal trading volume during the first quarter of 2012, operating expense was recorded at stated invoice price

On March, 6 2012, the Company converted $16,200 in design services payable into 600,000 restricted shares of common stock based on the market value of the stock on the date of conversion.

From April 16, 2010, through December 31, 2010, the Company granted a combined 674,932 shares of restricted common stock to eight consultants pursuant to individual consulting agreements. The consulting services provided for include predominantly management advisory services in the areas of sales, marketing, public relations, financing, and business development. Grant of the stock was in lieu of payment for these services. The length of consulting services under the agreements ranges from completed during the second quarter of 2010 through one year from effective transaction date, or July 1, 2011. The majority of the agreements expired on December 31, 2010. The Company recorded the transactions at the fair market value of the stock on the effective date of each transaction. The Company recognized operating expense over the term of the agreements. Accordingly, for the year ended December 31, 2012, and 2011, the Company recognized $0 and $41,586, respectively, as operating expense under the agreements.