Private Placements of Restricted Common Stock

3 Months Ended

Mar. 31, 2012

Private Placement Of Restricted Common Stock [Abstract]

Private Placement Of Restricted Common Stock [Text Block]

NOTE 2- PRIVATE PLACEMENTS OF RESTRICTED COMMON STOCK

During April 2007, the Company sold 28,000,000 (after adjusting for the 1 to 14 split) shares of its common stock to its founders for cash proceeds of $5,000. During December 2007, the company sold 21,000,000 (after adjusting for the 1 to 14 split) shares of its common stock in a private placement for cash of proceeds $75,000.

From February 25 through July 12, 2011, the Company issued an aggregate of 8,134,997 shares of common stock and warrants to purchase 8,134,997 shares of common stock to certain investors (the “Private Placements”). Each warrant has a three-year term and is exercisable at $0.60 per share (currently at $.10 due to the triggering of a down round full ratchet anti dilution provision). The warrants are redeemable by the Company in the event the Company’s common stock exceeds $3.00 for twenty of thirty trading days. The Company granted piggy-back registration rights for the securities issued in the Private Placements.

On December 2, 2011, one investor purchased 200,000 shares for gross proceeds of $40,000 in a private placement. The subscription agreement contains a "Purchase Price Protection" clause that grants the investor additional shares in the event of a private placement during the 10 month period from the date of the investment at a price per share less than the investor's purchase price. The additional shares shall be issued for no additional payment such that the total per share price paid by this investor will equal the amount paid by investors in such later private placement.

During February and March 2012, the Company issued an aggregate of 10,250,000 shares of restricted common stock to certain investors in a private placement and received aggregate gross proceeds of $1,025,000. The securities are subject to piggyback registration rights.

The Company received aggregate gross proceeds of $3,505,500 from the private placements as follows:

Date	Shares		Gross Proceeds		Related Warrant Liability at Inception		Related Warrant Liability at March 31, 2012
February 25, 2011		4,766,666	$	1,430,000	$	2,350,251	$	435,845
May 31, 2011		1,409,999		423,000		1,186,859		132,642
June 27, 2011		1,874,999		562,500		1,243,838		178,009
July 12, 2011		83,333		25,000		57,742		7,592
December 2, 2011		200,000		40,000		-		-
February 10, 2012		3,250,000		325,000		-		-
February 14, 2012		4,000,000		400,000		-		-
March 7, 2012		1,000,000		100,000		-		-
March 15, 2012		1,750,000		175,000		-		-
March 22, 2012		250,000		25,000		-		-
		18,584,997	$	3,505,500	$	4,838,690	$	754,088

The warrants are subject to full ratchet anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the $0.60 exercise price. Repricing events occurred twice since the warrants were issued, once to $0.20 on December 2, 2011 and again to $0.10 on February 10, 2012 as a result of private placements of restricted common stock. The warrants issued in this financing arrangement did not meet the conditions for equity classification and are required to be carried as a derivative liability, at fair value. Management estimates the fair value of the warrants on the inception dates, and subsequently at each reporting period, using the Black-Scholes option-pricing model, adjusted for dilution, because that technique embodies all of the assumptions (including volatility, expected terms, dilution and risk free rates) that are necessary to determine the fair value of freestanding warrants.