SHAREHOLDERS' EQUITY

3 Months Ended

Jun. 30, 2011

Stockholders Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

5. SHAREHOLDERS’ EQUITY

In January 2008, the Company reincorporated and changed its domicile from Utah to Delaware pursuant to a Reincorporation and Merger Agreement. Prior to the reincorporation, the Company had 120 million common shares authorized. In the reincorporation, the Company believed it maintained the same number of authorized shares. However, by reason of an administrative error on the part of the Company, this was not the case, and only 20 million common shares were authorized for issuance. The Company discovered this technical defect in December 2010 and immediately acted to cure the defect by obtaining majority shareholder approval to increase the number of authorized shares to 150 million which was effective in March 2011.

Stock Issued for Service

During the quarter ended June 30, 2011, the Company issued 272,343 shares of common stock to certain members of the Board of Directors and officers as compensation for their services rendered during the quarter ended June 30, 2011. These shares were valued at $134,400 which was charged to operations.

During the quarter ended June 30, 2011, the Company issued 52,730 shares of common stock to Point Capital Partners LLC in consideration for financial and accounting services rendered under its contract. The shares were valued at $30,000 which was charged to operations.

Regulation S Offering

In January 2011, the Company entered into purchase agreements with accredited non-U.S. investors for the issuance and sale of an aggregate of 7,000 units. Each unit consisted of 7,000 shares of the Company’s Series D Convertible Preferred Stock, par value $.0001 per share, and warrants for aggregate proceeds equal to $2,184,000 from the sale. ABG Sundal Collier Norge ASA who acted as an advisor to the investors in connection with the Sale, was issued 280 shares of Series D Convertible Preferred Stock in connection with the Sale. The Shares were convertible into 7,280,000 shares of the Company’s common stock, automatically upon the effectiveness of an amendment to the Company’s articles of incorporation increasing its authorized common stock to not less than 125 million shares. The shares were valued at $2,184,000.

Each unit also consisted of one warrant for each common share in which the preferred shares are convertible for a strike price of $0.40 per share exercisable any time prior to the second anniversary of the issue date and one warrant for each common share in which the preferred shares are convertible for a strike price of $0.60 per share exercisable any time prior to the third anniversary of the issue date. The warrants contain anti-dilution provisions that would reset the strike price under certain conditions if the Company issues common stock at a price lower than the applicable strike price within twelve months from the date of issuance (approximately January 2012).

In analyzing this transaction the Company concluded that the Series D preferred stock did not fall under ASC Topic 480, Distinguishing Liabilities and Equity and as such is classified as equity. The Company also considered whether the conversion option required bifurcation in accordance with ASC Topic 815 and determined that the conversion option and the host contract are clearly and closely related and so bifurcation is not required. As a result of the anti-dilution provisions the warrants are required to be classified as liabilities and adjusted to fair value for the twelve months that the anti-dilution provision is effective (after that time the warrants would be reclassified to equity if they are still outstanding).

The Company also considered whether there is a beneficial conversion feature discount as a result of a favorable conversion price. On the commitment date the Company’s stock price was $.57 per share and the conversion price is $.30 per share. However, due to the fair value of the warrant liability none of the proceeds are allocated to the preferred stock. In accordance with ASC Topic 470-20 any beneficial conversion feature would be limited to the proceeds allocated to the preferred stock and so then the beneficial conversion feature discount in this case is $0.

Additionally, the discount of $3,202,906 that results from the fair value of the warrants being in excess of the proceeds is amortized immediately during the fourth quarter when the Series D preferred stock was issued because the preferred stock was converted to common in March 2011.

The Company entered into a purchase agreement dated July 4, 2011 with accredited non-U.S. investors for the sale of 4,292,990 shares of the Company’s common stock, for proceeds equal to $1,921,810. An additional 373,430 shares were issued to ABG Sundal Collier Norge ASA, as a fee for acting as an advisor to the investors in connection with the transaction. The price per share for the Shares was $0.45. The investor also received two year warrants to purchase up to an aggregate of 4,292,990 shares of common stock at an exercise price per share of $0.45. The warrants contain anti-dilution provisions that would reset the strike price under certain conditions if the Company issues common stock at a price lower than the applicable strike price within twelve months from the date of issuance (approximately July 2012). The warrants do not permit cashless exercise and are closed to exercise for six months. The shares and warrants were issued in reliance upon an exemption from registration afforded under Regulation S of the Securities Act of 1933, as amended, for transactions involving an offering and sale exclusively to non-U.S. persons.