Equity

6 Months Ended

Jun. 30, 2011

Equity [Abstract]

Equity

Note 7—Equity

Common Stock Private Placement

On June 16, 2011, the Company completed a private placement, pursuant to which it sold an aggregate of 1,908,889 shares of Company common stock to 8 accredited investors for an aggregate purchase price of $1,718,000. The placement agent for the transaction received cash compensation of $137,440 and warrants to purchase 152,711 shares of Company common stock at an exercise price of $0.90 per share.

Redeemable Preferred stock

On May 24, 2011, the Company sent a mandatory conversion notice to the holders of its outstanding Series A Convertible Preferred Stock and Series B Convertible Preferred Stock (collectively, the “Preferred Stock”). Pursuant to the notice, each holder of Preferred Stock was notified that since the volume weighted average price of the Company’s common stock had exceeded 200% of the then effective conversion price of the Preferred Stock for twenty consecutive trading days, the Company was permitted to force the conversion of the Preferred Stock into Company common stock. The conversion was effective on July 7, 2011; provided that holders of Preferred Stock had the right to voluntarily convert their shares of Preferred Stock prior to such date.

As of June 30, 2011, the number of Preferred Stock outstanding, with a par value of $0.001 per share and a stated value of $1,000 per share is as follows:

Preferred Stock Series A	950
Preferred Stock Series B	487
Preferred Stock Series D	6,144
Total	7,581

The Company records accrued dividends at a rate of 6% per annum on the Series A, Series B and Series D Preferred. As of June 30, 2011, $253,169 was accrued for dividends payable. The Company paid cash of $106,157 and $304,384 during the three and six months ended June 30, 2011, respectively.

Preferred Stock Series D

On January 21 and 28, February 9 and March 1, 2011, the Company completed a private placement of securities of Series D Preferred and warrants. Each of the foregoing securities were subject to the “down-round” protection and if at any time while the Series D Preferred or warrants are outstanding, we sell or grant any option to purchase or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any sale, grant or any option to purchase or other disposition), any common stock or common stock equivalents at an effective price per share that is lower than the then conversion price of the Series D Preferred (“Conversion Price”) or the exercise price of the warrants, then the conversion price and exercise price will be reduced to equal the lower price. The preferred stock has been classified within the mezzanine section between liabilities and equity in its consolidated balance sheets in accordance with Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) because any holder of Series D Preferred may require the Company to redeem all of its Series D Preferred in the event of a triggering event which is outside of the control of the Company.

The details of the Series D Preferred financing for the six months ended June 30, 2011 are as follows:

	Number of shares of		Number of warrants
Date of Financing	Series D Preferred(1)		issued(2)
January 21, 2011		1,234		2,665,440
January 28, 2011		1,414		3,054,240
February 9, 2011		3,436		7,421,760
March 1, 2011		50		108,000
		6,134		13,249,440

(1)	Series D Preferred at a stated par value of $1,000.
(2)	Warrants to purchase shares of Common Stock at an exercise price of $0.50 per share issued to certain accredited investors and placement agents.

Conversion option of Redeemable Preferred stock

The embedded conversion option for the Series A Preferred, Series B Preferred and Series D Preferred has been recorded as a derivative liability under ASC 815 in the consolidated balance sheet as of June 30, 2011 and December 31, 2010. As of June 30, 2011 the derivative liability was re-measured resulting in an expense of $1,561,412 and $8,182,138 in our statement of operations for three months and six months, respectively. The fair value of the derivative liability is determined using the Black-Scholes option pricing model and is affected by changes in inputs to that model including our stock price, expected stock price volatility, the contractual term, and the risk-free interest rate. The Company will continue to classify the fair value of the embedded conversion option as a liability and re-measure on the Company’s reporting dates until the preferred stock is converted into common stock.

The embedded conversion option for the Series A Preferred, Series B Preferred and Series D Preferred was valued at $6,602,940 at June 30, 2011 at fair value using the Black-Scholes option pricing model. The fair market value of the derivative liability was computed using the Black-Scholes option-pricing model with the following weighted average assumptions as of the dates indicated:

	June 30, 2011			December 31, 2010
Expected life (years)	1.5 years			1.6 years
Interest rate		0.4	%		1.3	%
Dividend yield		—			—
Volatility		62	%		63	%