SHAREHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2012

Stockholders Equity Note [Abstract]

SHAREHOLDERS' EQUITY

7.      SHAREHOLDERS’ EQUITY

The Company issued a total of 30,265,835 common shares in the quarter ended June 30, 2012, described further as follows:

The Company’s independent directors annual compensation is $16,000 to be paid quarterly in restricted stock. The Company issued the directors 194,175 shares of restricted stock on April 1, 2012 for their first quarter 2012 compensation.

The Company issued 1,783,986 shares of common stock to management employees in lieu of $173,750 cash compensation for services rendered in the first quarter of 2012 which had been recorded at a value of $17,840 in stock based compensation based upon individual tax elections made by each recipient. The Company issued 50,000 shares of common stock as a bonus to the Vice President of Operations which was recorded at a value of $500 in stock based compensation based upon the individual’s tax election. The shares vest six months after issuance and are subject to forfeiture upon voluntary termination of employment.

The Company issued 750,000 shares of restricted stock to a financial advisory firm in exchange for $45,000 in services to be rendered from May 10, 2012 to October 18, 2012. The agreement calls for an additional payment of 750,000 shares of restricted stock in the event the Company files another form S-1. The Company issued 200,000 shares of restricted stock to its securities law firm in exchange for $10,000 in additional services.

The Company issued 250,000 shares of restricted stock in a 2012 Private Stock Sale to one qualified investor for $25,000. The shares were accompanied by an equal number of warrants with a $0.15 strike price and termination date of December 31, 2017.

During the second quarter of 2012, twelve of the nineteen investors elected to convert a total of $521,161 Debenture Series 2011 plus Series B Warrants into 10,423,227 shares of common stock. . A total of $28,031 in accrued interest on the converted debentures was settled with 280,315 shares of common stock.

During the second quarter of 2012, ten of the sixteen investors elected to convert a total of $925,000 Debenture Series 2011 plus Series A Warrants into 9,946,762 shares of common stock. A total of $111,266 in accrued interest on the converted debentures was settled with 596,918 shares of common stock.

During the second quarter of 2012, all four investors elected to convert a total of $500,000 Debenture Series 2012 plus Series C Warrants into 5,707,764 shares of common stock. A total of $7,243 in accrued interest on the converted debentures was settled with 82,688 shares of common stock.