CAPITAL STOCK

6 Months Ended

Sep. 30, 2011

CAPITAL STOCK

CAPITAL STOCK

NOTE 11 - CAPITAL STOCK

Preferred Stock

The Company has 10,000,000 authorized shares of preferred stock and the Board of Directors has broad power to create one or more series of preferred stock and to designate the rights, preferences, privileges and limitations of the holders of such series.  As of September 30, 2011, the Company has one series of preferred stock - the Series A Convertible Preferred Stock.

Each share of Series A Convertible Preferred Stock is convertible into 1.3072 shares of common stock, with an effective conversion price of $0.218.  Based on the current conversion ratio, there were 10,432,740 and 11,606,605 common shares underlying the Series A Convertible Preferred Stock as of September 30, 2011 and March 31, 2011 respectively.

In addition to the conversion rights described above, the certificate of designation for the Series A Convertible Preferred Stock provides that the largest shareholder of the Series A Convertible Preferred Stock or its affiliates will not be entitled to convert the Series A Convertible Preferred Stock into shares of common stock to the extent that such conversion or exercise would result in beneficial ownership by the investor and its affiliates of more than 4.9% of the shares of common stock outstanding after such exercise or conversion.  This provision cannot be amended.

In addition, under the terms of the purchase agreement, this shareholder has the right of first refusal in the event that the Company seeks to raise additional funds through a private placement of securities, other than exempt issuances.  The percentage of shares that other investors may acquire is based on the ratio of shares held by the shareholder plus the number of shares issuable upon conversion of Series A Convertible Preferred Stock owned by the shareholder to the total of such shares.  No dividends are payable with respect to the Series A Convertible Preferred Stock and no dividends are payable on common stock while Series A Convertible Preferred Stock is outstanding.  Common stock cannot be redeemed while preferred stock is outstanding.

So long as any shares of Series A Convertible Preferred Stock are outstanding, the Company shall not, without the affirmative approval of the holders of 75% of the outstanding shares of Series A Convertible Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Series A Convertible Preferred Stock, (b) authorize or create any class of stock ranking as to dividends or distribution of assets upon liquidation senior to or otherwise pari passu with the Series A Convertible Preferred Stock, or any of preferred stock possessing greater voting rights or the right to convert at a more favorable price than the Series A Convertible Preferred Stock, (c) amend its certificate of incorporation or other charter documents in breach of any of the provisions hereof, (d) increase the authorized number of shares of Series A Convertible Preferred Stock, or (e) enter into any agreement with respect to the foregoing. The Series A Convertible Preferred Stock has no voting rights and may not be voted on matters other than those set forth in the preceding sentence and for those matters for which its vote is required by law. The Series A Convertible Preferred Stock does not have a vote in the elections of our directors.

Upon any liquidation the Company is required to pay $0.285 for each share of Series A Convertible Preferred Stock.  The payment will be made before any payment to shareholders of any junior securities and after payment to shareholders of securities that are senior to the Series A Convertible Preferred Stock.  The Company had 7,980,982 and 8,878,982 shares of Series A Convertible Preferred Stock outstanding at September 30, 2011 and March 31, 2011 respectively.

Common Stock

The Company had 90,000,000 authorized common shares at September 30, 2011 and March 31, 2011 respectively.  There were 16,648,993 and 15,422,888 shares of common stock outstanding at September 30, 2011 and March 31, 2011 respectively.

During the fiscal year ending March 31, 2012 (“fiscal 2012”), as of the date of the filing of this form 10-Q, the Company has issued 52,999 shares of common stock in connection with the exercise of stock options and 1,173,861 shares of common stock in connection with a Series A Convertible Preferred Stock conversion.