Series B-1 Redeemable Convertible Preferred Stock	6 Months Ended
Jun. 30, 2015
Notes to Financial Statements
Note 10 - Series B-1 Redeemable Convertible Preferred Stock	In November 2012, the Board of Directors designated 20,000 shares of 10% redeemable convertible Series B-1 par value $.001 preferred stock. In connection therewith, for each $35 of consideration, the Company offered one unit consisting of one share of Series B-1 convertible preferred stock and 50 common stock warrants exercisable at $1.00 per share. In March 2014, the certificate of designation was amended to increase in the shares designated to 80,000. During the three and six months ended June 30, 2014, the Company issued 431 and 10,776 shares of Series B-1 preferred and 21,550 and 538,800 warrants for proceeds of $15,085 and $377,135, respectively. The holder of Series B-1 preferred stock has the right, at any time, to convert each share into common stock at a conversion ratio of one share of Series B-1 preferred stock to 50 shares of common stock at a conversion price of $.70 per common share. Each share of Series B-1 preferred stock has a liquidation preference equal to $35 per share plus any accrued or declared and unpaid dividends owed to holders of shares. In the event of a liquidation, winding up, or dissolution of the Company, the Series B-1 ranks senior to the common stock, junior to the Series A, A-1 and A-2 preferred stock, and equal to the Series B preferred stock. Commencing December 31, 2012, cumulative dividends on each share accrue at a rate of 10% of the $35 liquidation amount. Dividends are payable quarterly in cash when and if declared by the Board of Directors. The dividends accrue whether or not they have been declared by the board of directors and whether or not there are profits or other funds legally available. Through March 31, 2014, in the event that dividends have not been declared by the board of directors prior to the relevant dividend payment date, such dividends shall be payable in shares of Series B-1 preferred stock. During the three and six months ended June 30, 2015 and the three and six months ended June 30, 2014, an $44,598, $75,612, $28,428, and $50,053 of dividends accumulated for Series B-1 preferred stock, respectively. Of these, during the six months ended June 30 2014, dividends of $21,625, respectively, were paid by the issuance of 618 shares of Series B-1 preferred. The conversion ratio is subject to adjustment when the Company declares or pays dividends, makes a distribution on common stock payable in common shares, or affects a subdivision, split, consolidation, combination, or reverse split of outstanding common shares into a greater or lesser number of common shares. The conversion price of $0.70 is adjusted based on changes in the conversion ratio. The Series B-1 holder is entitled to receive the number of common stock or securities or property that such holder would have owned or been entitled to receive upon the happening of such event had the Series B-1 preferred been converted immediately prior to the record or effective date of such event. The Company, at its option, may require conversion of all or any prorata portion of shares of Series B-1 preferred stock outstanding into common stock if at any time i) the common stock is listed for trading on a national securities exchange, an inter-dealer automated quotation system, or over the counter bulletin board, ii) the Company shall have prepared and filed with the Securities and Exchange Commission a registration statement covering the shares of common stock to be issued upon due conversion of preferred stock, and such registration statement shall have been declared effective under the Securities Act of 1933, iii) during any preceding period of twenty consecutive trading days (while i) and ii) are fulfilled) the closing price equals or exceeds 157% of the conversion price then in effect, and iv) the Company is current on its dividends on the Series B-1 preferred stock. The holders of Series B-1 preferred stock have the right to one vote for each share of common stock into which such share of preferred stock could then be converted. On or after August 31, 2017, a holder can request the Company repurchase on the date which is 30 calendar days thereafter, all shares of Series B-1 preferred stock held by the holder for cash equal to $35 per share plus accrued and unpaid dividends as of the repurchase date. The Company has the option whether or not to agree to the repurchase. In the event the Company fails to repurchase or payment of Series B-1 dividends is six quarters in arrears, the conversion price shall decrease to $0.595, and in addition, until such failure or arrearage is cured, the dividend rate will increase to 18% and the majority holders of Series B-1 preferred stock have the right to elect the majority of the board of directors, At June 30, 2015 dividends on the Series B-1 were five quarters in arrears. Warrants - Each warrant issued together with the Series B-1 preferred entitles the holder to acquire one share of $.001 par value common stock at an exercise price of $1 per common share, and expires on the earlier of March 31, 2016 or such date at which i) the common stock is listed on the OTCBB and ii) the shares to be acquired by exercise of the warrants have been registered under the Securities Act of 1933, for 60 consecutive days. If the Company subdivides or combines its common stock, issues or pays the holders of common stock, or take a record of the holders of common stock for the purpose of entitling them to receive a dividend payable in or distribution of common stock, the number of shares of common stock purchasable upon exercise of the warrant and the warrant price shall be proportionally adjusted. Because the warrants were issued in conjunction with the Series B-1 preferred stock, the proceeds of the offering are allocated between the Series B-1 preferred and the warrants based on the relative fair value of each instrument. The assumed value of the Series B-1 preferred was determined based on the fair value of the underlying common shares and the fair value of the warrants was valued using the Black-Scholes option pricing model. Registration rights - In connection with the Series B-1 preferred stock subscription agreement, the Company agreed to pay subscribers 1/2% of the liquidation preference of shares held by subscribers each month on beginning on dates varying between July 1, 2013 and September 8, 2015 until i) the common shares are eligible for trading on the OTCBB or OTC Pinks as noted in the respective subscription agreement and ii) the common shares issuable upon conversion of the shares shall be registered under the Securities Act of 1933 or the subscriber is able to sell such common shares under Rule 144. Because the transfer of consideration is probable and reasonably estimable at inception of the arrangement, the contingent liability related to registration rights will be included in the allocation of proceeds in accordance with GAAP. As of June 30, 2015 and December 31, 2014, the estimated liability amounted to $75,672 and $69,850, respectively, and the change in the estimated liability for the three months and six months ended June 30, 2015 amounting to $5,822 is included in other expense on the accompanying statement of operations. The arrangement provides for no limitation as to the maximum potential consideration to be transferred.

Series B-1 Redeemable Convertible Preferred Stock

6 Months Ended

Jun. 30, 2015

Note 10 - Series B-1 Redeemable Convertible Preferred Stock

In November 2012, the Board of Directors designated 20,000 shares of 10% redeemable convertible Series B-1 par value $.001 preferred stock. In connection therewith, for each $35 of consideration, the Company offered one unit consisting of one share of Series B-1 convertible preferred stock and 50 common stock warrants exercisable at $1.00 per share. In March 2014, the certificate of designation was amended to increase in the shares designated to 80,000. During the three and six months ended June 30, 2014, the Company issued 431 and 10,776 shares of Series B-1 preferred and 21,550 and 538,800 warrants for proceeds of $15,085 and $377,135, respectively.

The holder of Series B-1 preferred stock has the right, at any time, to convert each share into common stock at a conversion ratio of one share of Series B-1 preferred stock to 50 shares of common stock at a conversion price of $.70 per common share. Each share of Series B-1 preferred stock has a liquidation preference equal to $35 per share plus any accrued or declared and unpaid dividends owed to holders of shares. In the event of a liquidation, winding up, or dissolution of the Company, the Series B-1 ranks senior to the common stock, junior to the Series A, A-1 and A-2 preferred stock, and equal to the Series B preferred stock.

Commencing December 31, 2012, cumulative dividends on each share accrue at a rate of 10% of the $35 liquidation amount. Dividends are payable quarterly in cash when and if declared by the Board of Directors. The dividends accrue whether or not they have been declared by the board of directors and whether or not there are profits or other funds legally available. Through March 31, 2014, in the event that dividends have not been declared by the board of directors prior to the relevant dividend payment date, such dividends shall be payable in shares of Series B-1 preferred stock. During the three and six months ended June 30, 2015 and the three and six months ended June 30, 2014, an $44,598, $75,612, $28,428, and $50,053 of dividends accumulated for Series B-1 preferred stock, respectively. Of these, during the six months ended June 30 2014, dividends of $21,625, respectively, were paid by the issuance of 618 shares of Series B-1 preferred.

The conversion ratio is subject to adjustment when the Company declares or pays dividends, makes a distribution on common stock payable in common shares, or affects a subdivision, split, consolidation, combination, or reverse split of outstanding common shares into a greater or lesser number of common shares. The conversion price of $0.70 is adjusted based on changes in the conversion ratio. The Series B-1 holder is entitled to receive the number of common stock or securities or property that such holder would have owned or been entitled to receive upon the happening of such event had the Series B-1 preferred been converted immediately prior to the record or effective date of such event.

The Company, at its option, may require conversion of all or any prorata portion of shares of Series B-1 preferred stock outstanding into common stock if at any time i) the common stock is listed for trading on a national securities exchange, an inter-dealer automated quotation system, or over the counter bulletin board, ii) the Company shall have prepared and filed with the Securities and Exchange Commission a registration statement covering the shares of common stock to be issued upon due conversion of preferred stock, and such registration statement shall have been declared effective under the Securities Act of 1933, iii) during any preceding period of twenty consecutive trading days (while i) and ii) are fulfilled) the closing price equals or exceeds 157% of the conversion price then in effect, and iv) the Company is current on its dividends on the Series B-1 preferred stock. The holders of Series B-1 preferred stock have the right to one vote for each share of common stock into which such share of preferred stock could then be converted.

On or after August 31, 2017, a holder can request the Company repurchase on the date which is 30 calendar days thereafter, all shares of Series B-1 preferred stock held by the holder for cash equal to $35 per share plus accrued and unpaid dividends as of the repurchase date. The Company has the option whether or not to agree to the repurchase. In the event the Company fails to repurchase or payment of Series B-1 dividends is six quarters in arrears, the conversion price shall decrease to $0.595, and in addition, until such failure or arrearage is cured, the dividend rate will increase to 18% and the majority holders of Series B-1 preferred stock have the right to elect the majority of the board of directors, At June 30, 2015 dividends on the Series B-1 were five quarters in arrears.

Warrants - Each warrant issued together with the Series B-1 preferred entitles the holder to acquire one share of $.001 par value common stock at an exercise price of $1 per common share, and expires on the earlier of March 31, 2016 or such date at which i) the common stock is listed on the OTCBB and ii) the shares to be acquired by exercise of the warrants have been registered under the Securities Act of 1933, for 60 consecutive days. If the Company subdivides or combines its common stock, issues or pays the holders of common stock, or take a record of the holders of common stock for the purpose of entitling them to receive a dividend payable in or distribution of common stock, the number of shares of common stock purchasable upon exercise of the warrant and the warrant price shall be proportionally adjusted.

Because the warrants were issued in conjunction with the Series B-1 preferred stock, the proceeds of the offering are allocated between the Series B-1 preferred and the warrants based on the relative fair value of each instrument. The assumed value of the Series B-1 preferred was determined based on the fair value of the underlying common shares and the fair value of the warrants was valued using the Black-Scholes option pricing model.

Registration rights - In connection with the Series B-1 preferred stock subscription agreement, the Company agreed to pay subscribers 1/2% of the liquidation preference of shares held by subscribers each month on beginning on dates varying between July 1, 2013 and September 8, 2015 until i) the common shares are eligible for trading on the OTCBB or OTC Pinks as noted in the respective subscription agreement and ii) the common shares issuable upon conversion of the shares shall be registered under the Securities Act of 1933 or the subscriber is able to sell such common shares under Rule 144. Because the transfer of consideration is probable and reasonably estimable at inception of the arrangement, the contingent liability related to registration rights will be included in the allocation of proceeds in accordance with GAAP.

As of June 30, 2015 and December 31, 2014, the estimated liability amounted to $75,672 and $69,850, respectively, and the change in the estimated liability for the three months and six months ended June 30, 2015 amounting to $5,822 is included in other expense on the accompanying statement of operations. The arrangement provides for no limitation as to the maximum potential consideration to be transferred.