13. Changes in Stockholder's Equity (Deficit)

9 Months Ended

Sep. 30, 2012

Stockholders' Equity Note [Abstract]

Changes in Stockholder's Equity (Deficit)

On September 11, 2012, the Company’s CEO, holding more than two-thirds voting power of the Company’s voting stock, voted to amend the Company’s Articles of Incorporation and increase the number of authorized shares of the Company’s Class A Common Stock from 300 million shares to 2 billion shares, along with amending the par value from $0.001 to $0.01 of the Company’s 40 million shares of “blank check” preferred stock, consisting of 20 million shares of Series A and 20 million shares of Series B Preferred Stock. The amendment did not have any effect on the 60 million authorized shares of Class B Common stock, other than to increase the preferential voting rights of these shares from 100 votes per share to 1,000 votes per share. Accordingly, the Articles of Incorporation were amended on September 11, 2012. The Company has 1,000 shares of Series A convertible stock and 1,000 shares of Series B convertible stock designated.

Convertible Preferred Stock, Series A

The Company has 20 million authorized shares of $0.01 par value Series A Convertible Preferred Stock (“Series A Preferred Stock”). The Series A Preferred Stock accrues dividends equal to 1.5% of the Company’s revenues per quarter, beginning on January 1^st of any calendar year in which the Company has generated revenue over $2 million, and an additional 24% of the Company’s net income beginning on January 1^st of any calendar year in which the Company has generated net income over $2 million. The dividends are payable at the discretion of the Company, provided that any unpaid dividends accrue until paid. The Series A Preferred Stock includes a liquidation preference equal to $0.01 per share, plus any accrued and unpaid dividends. The Series A Preferred Stock is convertible, at the option of the holder into shares of the Company’s Class A Common Stock, with five business days’ notice into 60% of the total number of then issued and outstanding shares of Class A Common Stock. The Series A Preferred Stock has limited voting rights, relating solely to matters which adversely affect the rights of the Series A Preferred Stock holders.

On July 2, 2012, the Company issued 1,000 shares of convertible Series A preferred stock to the Company’s CEO for services provided and personal guaranties associated with previous acquisition activities. The total fair value of the preferred stock was $229,236 based on valuations performed using an option-pricing method based on the Company’s publicly traded common stock on the date of grant, and a 5% discount for lack of marketability.

Convertible Preferred Stock, Series B

The Company has 20 million authorized shares of $0.01 par value Series B Convertible Preferred Stock (“Series B Preferred Stock”). The Series B Preferred Stock accrues dividends equal to 1.5% of the Company’s revenues per quarter, beginning on January 1^st of any calendar year in which the Company has generated revenue over $1 million, and an additional 6% of the Company’s net income beginning on January 1^st of any calendar year in which the Company has generated net income over $2 million. The dividends are payable at the discretion of the Company, provided that any unpaid dividends accrue until paid. The Series B Preferred Stock includes a liquidation preference equal to $0.01 per share, plus any accrued and unpaid dividends. The Series B Preferred Stock is convertible, at the option of the holder into shares of the Company’s Class A Common Stock, with five business days notice into 10% of the total number of then issued and outstanding shares of Class A Common Stock, provided that no conversion will take place until all holders of the Series B Preferred Stock consent to such conversion. The Series B Preferred Stock has limited voting rights, relating solely to matters which adversely affect the rights of the Series B Preferred Stock holders.

On July 2, 2012, the Company issued a total of 1,000 shares of convertible Series B preferred stock amongst three related parties pursuant to the exchange and extension of a promissory note owed to Star Financial Corporation, a related party. The total fair value of the preferred stock was $61,130 based on valuations performed using an option-pricing method based on the Company’s publicly traded common stock on the date of grant, and a 5% discount for lack of marketability.

Common Stock, Class A

The Company has 2 billion authorized shares of $0.01 par value class A common stock.

On March 13, 2012, the Company issued 1,075,269 shares of its $0.01 par value class A common stock pursuant to the partial conversion in the amount of $10,000 of a $50,000 convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On June 26, 2012, the Company issued 1,538,462 shares of its $0.01 par value class A common stock pursuant to the partial conversion in the amount of $10,000 of a $50,000 convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On July 9, 2012, the Company issued 1,578,947 shares of its $0.01 par value class A common stock pursuant to the conversion of $9,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On July 16, 2012, the Company issued 1,525,424 shares of its $0.01 par value class A common stock pursuant to the conversion of $9,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On July 19, 2012, the Company issued 30,000,000 shares of its $0.01 par value class A common stock to the Company’s CEO in consideration for providing a personal guaranty and collateral on twelve loans over the past 10 years. The total fair value of the common stock was $375,000 based on the closing price of the Company’s common stock on the date of grant.

On July 19, 2012, the Company issued 3,000,000 shares of its $0.01 par value class A common stock to a related party in consideration for providing a personal guaranty and collateral on two acquisition loans during 2010 and 2011. The total fair value of the common stock was $37,500 based on the closing price of the Company’s common stock on the date of grant.

On July 19, 2012, the Company issued 3,000,000 shares of its $0.01 par value class A common stock to another related party in consideration for providing a personal guaranty and collateral on two acquisition loans during 2010 and 2011. The total fair value of the common stock was $37,500 based on the closing price of the Company’s common stock on the date of grant.

On July 24, 2012, the Company issued 789,474 shares of its $0.01 par value class A common stock pursuant to the conversion of $6,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On July 31, 2012, the Company issued 1,898,734 shares of its $0.01 par value class A common stock pursuant to the conversion of $15,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On August 7, 2012, the Company issued 1,481,481 shares of its $0.01 par value class A common stock pursuant to the conversion of $12,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On August 21, 2012, the Company issued 2,033,898 shares of its $0.01 par value class A common stock pursuant to the conversion of $12,000 of convertible debt, consisting of $10,500 of principal and $1,500 of accrued and unpaid interest. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On August 27, 2012, the Company issued 20,000,000 shares of its $0.01 par value class A common stock to the Company’s CEO in consideration for providing product development services. The total fair value of the common stock was $130,000 based on the closing price of the Company’s common stock on the date of grant.

On August 27, 2012, the Company issued 2,500,000 shares of its $0.01 par value class A common stock to a family member of the Company’s CEO in consideration for providing a personal guaranty and collateral on two loans obtained during 2012. The total fair value of the common stock was $16,250 based on the closing price of the Company’s common stock on the date of grant.

On August 27, 2012, the Company issued 2,500,000 shares of its $0.01 par value class A common stock to a family member of the Company’s CEO in consideration for providing a personal guaranty and collateral on two loans obtained during 2012. The total fair value of the common stock was $16,250 based on the closing price of the Company’s common stock on the date of grant.

On September 6, 2012, the Company issued 1 billion shares of its $0.01 par value class A common stock to the Company’s CEO in consideration for various services performed, and to be performed over a ten year period beginning on September 6, 2012. The total fair value of the common stock was $6,000,000 based on the closing price of the Company’s common stock on the date of grant, which is presented as a deduction against additional paid in capital in the equity section of the balance sheet until the terms of the vesting periods are satisfied. The services performed and vesting periods are as follows:

Vesting	Shares	Fair
Terms	Granted	Value	Services Performed
(1)	250,000,000	$1,500,000	Base salary of 25 million shares per year over a ten year term
(2)	225,000,004	1,350,000	Compensation bonus for services provided
(2)	25,000,000	150,000	Compensation for services provided related to the acquisition of IntelliSys
(2)	25,000,000	150,000	Compensation for services provided related to the acquisition of PRM
(2)	25,000,000	150,000	Compensation for services provided related to the acquisition of DFI
(2)	25,000,000	150,000	Compensation for services provided related to the acquisition of K9 Bytes
(2)	25,000,000	150,000	Compensation for services provided related to the acquisition of AutoHire Software
(2)	33,333,333	200,000	Compensation for services provided related to the acquisition of MS Health
(3)	33,333,333	200,000	Compensation for services provided related to the acquisition of a future acquisition
(2)	33,333,333	200,000	Compensation for use of the CEO's personal residence as collateral on various loans
(4)	299,999,997	1,800,000	Compensation for future use of the CEO's personal residence as collateral on various loans
	1,000,000,000	$6,000,000

⁽¹⁾ Vests annually at a rate of 1/10th per year from the anniversary date of the employment agreement (September 6, 2012), subject to the recognition of at least $10 million in revenues for any calendar year.

⁽²⁾ Vests subject to the recognition of at least $10 million in revenues for any calendar year.

⁽³⁾ Vests upon the latter of both, a) the future closing of an acquisition, and b) the recognition of at least $10 million in revenues for any calendar year.

⁽⁴⁾ Vests annually at a rate of 1/9th per year from the anniversary date of the employment agreement (September 6, 2012), subject to the recognition of at least $10 million in revenues for any calendar year.

On September 15, 2012, the Company issued 50,000,000 shares of its $0.01 par value class A common stock pursuant to the conversion of $250,000 of convertible debt owed to Star Financial Corporation, a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

On September 24, 2012, the Company issued 10,343,963 shares of its $0.01 par value class A common stock in settlement of $53,968 of accounts payable owed for the purchase of computer equipment on June 16, 2012 from L&F Lawn Services, a related party. The total fair value of the common stock was $116,887 based on the closing price of the Company’s common stock on the date of grant, resulting in a loss $62,919.

Common Stock, Class B

The Company has 60,000,000 authorized shares of $0.01 par value class B common stock. The class B common stock carries preferential voting rights of 1,000 votes to each class A vote (1,000:1).

On July 1, 2012, the Company issued 3,000,000 shares of class B common stock to the Company’s CEO for services provided and personal guaranties associated with previous acquisition activities. The fair value of the class B common stock was $24,000 based on valuations performed using an option-pricing method based on the Company’s publicly traded common stock on the date of grant, and a 5% discount for lack of marketability.