Note 11. Stockholders' Deficit

6 Months Ended

Jun. 30, 2011

Stockholders' Equity Note Disclosure [Text Block]

Note 11.  Stockholders’ Deficit

The Company’s Certificate of Incorporation authorize the issuance of up to 10,000,000 shares of preferred stock at a par value of $0.001. The voting rights, dividend rate, redemption price, rights of conversion, rights upon liquidation and other preferences are subject to determination by the Board of Directors. At June 30, 2011, 54,163 shares were issued and outstanding.

On May 6, 2011, the Company retired 61,475 shares of preferred stock and recognized a gain of $62. The shares were owned by one shareholder who initially received the shares for services to be performed. The shares were retired in exchange for cancellation of the contract for services that were never delivered.

The Company’s Certificate of Incorporation authorize the issuance of up to 5,000,000,000 shares of common stock at a par value of $0.000003.  At June 30, 2011, 2,337,209,521 shares were issued and outstanding.

Earnings Per Share (EPS) was calculated by dividing net loss as of June 30, 2011 of (665,311) by the weighted average number of common shares outstanding in the quarter (2,286,892,530). The result was ($0.00).

On a fully diluted basis, the calculation was the same as all potential stock issuances from convertible notes and preferred shares would have an anti-dilutive effect on earnings per share.

During the three months ended March 31, 2011, the Company issued 60,000,000 shares of common stock to Debbie Werner to pay $150,000 liability from acquisition of United. The Company relieved the stock payable of $150,000 with the issuance and recognized no gain or loss as the value of the shares was equal to $150,000 on the date of issuance.

The Company issued 10 million shares of restricted common stock to an employee for services during the three months ended March 31, 2011. These shares were valued and expensed for $25,000 based on the closing price of the shares on the date of grant.

During the six months ended June 30, 2011, convertible debt holders converted $56,027 of convertible notes and accrued interest into 46,677,083 shares of common stock. These notes converted were converted at the holder’s option. No gain or loss was recorded on these conversions as the conversions were within the original contract terms.

During the six months ended June 30, 2011, related party debt holders sold a total of $450,000 of debt to third parties. The third parties then exchanged the debt into convertible notes that were converted to common stock. A total of 373,139,008 common shares were issued upon conversion of these modified notes. The loss on these conversions was $224,000 and is included within the loss of $324,000 for modification and conversion of notes described below.

During the six months ended June 30, 2011, a third party convertible debt holder sold a total of $100,000 of convertible debt to another third party. The recipient of the convertible note then converted the note into common stock. A total of 100,000,000 common shares were issued upon conversion. The convertible note was a part of the derivative liability prior to conversion. The embedded derivative was marked to market upon the settlement date and re-classed to additional paid in capital upon settlement. No gain or loss was recorded on the conversion.

Loss on conversions The Company booked a loss on conversion of $324,000 for the modification and conversion of $550,000 of debt into common stock. The loss was the difference between the reduction of debt and the stock value of the shares issued on the date of conversion for all notes convertible at the Company’s option. All convertible notes convertible at the holder’s option were valued as a part of the derivative liability with an offsetting discount of $113,794 and loss at the modification date. The discount was fully amortized upon conversion of the debt.

The Company also recognized a loss of $157,148 on the conversion of convertible debt of $219,800 and accrued interest of $7,991. These convertible notes were convertible at the Company’s option and therefore not considered to have substantive conversion features. As a result a loss was recorded on the conversion dates based on the difference between the fair value of the shares issued and the value of the liability converted.