Stockholders' Equity

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Stockholders' Equity

NOTE 6 – STOCKHOLDERS’ EQUITY

Preferred stock

In February 2008, a majority of the Company’s subsidiary shareholders approved an amendment to the Articles of Incorporation of the subsidiary to allow 50,000,000 shares of common stock to be authorized and 10,000,000 shares of no par value preferred stock to be authorized.  Included in the preferred shares is 5,000,000 shares designated as Series A Preferred Stock (“Series A”), of which there are ten sub-series.  The first set of sub-series are (Series A-1, A-2, A-3, A-4, A-5) of 500,000 shares in each sub-series, with a par value and redemption value of $1,000 per share.  The second set of sub-series are (Series A-6, A-7, A-8, A-9, A-10) of 500,000 shares each, with a par value of $1,000 and the redemption value to be determined by the Board of Directors at a future time.

As of the date of this report, the Company has been unable to authorize preferred stock in the parent entity to allow the preferred stock exchange discussed in Note 1 “Share Exchange” to be completed.  However, as the preferred stockholders of the subsidiary have legal rights to own preferred stock of the parent, the Company has accounted for the exchange as if it has occurred, in substance and reflects this preferred stock in the consolidated financial statements as issuable.

Other rights and preferences of the Series A preferred stock are as follows:

Dividends: Dividends payable pro rata on all outstanding Series A Preferred Stock on a quarterly basis at a rate of 6% of redemption value per year during the first year of issuance, 8% of redemption value per year during the second year of issuance and 12% of redemption value per year during all years through redemption.  The dividends are cumulative.

Optional redemption: any time upon 30 days notice to shareholder the Company has the Option to redeem the Series A Preferred Stock. Accrued but unpaid dividends are to be paid first.

Liquidation Preference: The Series A shares have preference over all other classes of capital stock.

Conversion: right to convert at any time. Conversion Rate: The number of shares to be issued upon conversion will equal the stated redemption value divided by the greater of $1.00 or 20% below the 20 day average trading price of common stock if company is publicly trade at time of conversion.  Any accrued but unpaid dividends can also be converted at the option of the holder.  Conversion price is subject to standard anti-dilution provisions.

No voting rights. However if more than 50% of Series A Preferred Stock is outstanding , holders will be require to approve a change in the company’s line of business, payment of dividends on common stock, repurchase of common stock and all actions concerning preferred stock.

On February 12, 2008 the Board of Directors authorized the offering to accredited investors only of Series A Convertible Preferred Stock at the offering price of $1,000 per share in exchange for real property and accordingly, in February 2008, the Company issued 210 shares of its Series A-3 preferred stock in exchange for real estate valued at $202,000. At September 30, 2011 and December 31, 2010, theses shares remain outstanding.

Common stock issued for cash

In March 2011, the Company initiated a $250,000 offering at $0.25 per share pursuant to Regulation D.  Proceeds from this offering were $230,000, and the Company issued 920,000 shares of its common stock, “A” warrants to purchase 460,000 shares of its common stock at an exercise price of $0.50, expiring six months following the purchase date and “B” warrants to purchase 460,000 shares of its common stock at an exercise price of $1.00, expiring 9 months following purchase date to five investors.  On July 29, 2011, in an effort to induce its warrant holders to exercise their $0.50 “A” warrants (the “Warrants Inducement”), the Company offered to extend the term of the outstanding $1.00 “B” warrants by three months and to reduce the exercise price to $0.50 for every $0.50 “A” warrant exercised.  Through September 30, 2011, “A” warrants have been exercised for 110,000 shares of common stock for proceeds of $55,000. In connection with the Warrant Inducement, the Company valued the warrants inducement expense as the difference between the fair value of the warrants before the modification and after the modification on the inducement exercise date using the Black-Scholes pricing method.  The value of the warrant modification expensed was $4,678 for investors who exercised their warrants under the inducement offer and was included in interest expense on the accompanying statement of operations.

Common stock issued for services

On July 15, 2011, the Company entered into a six month consulting agreement in exchange for the issuance of 50,000 restricted vested common shares.  The value of these shares is $12,500 based on recent private placement sales at $0.25 per share and was recorded as a prepaid expense to be expensed over the life of the agreement.  Further, the shares issued are subject to a one year leak out agreement. In connection with issuance of these common shares, the Company recorded professional fees during the nine months ended September 30, 2011 of $5,208 with a remaining prepaid expense at September 30, 2011 of $7,292.

On February 9, 2011, (employment date or grant date) NB Regeneration, a wholly-owned subsidiary of the Company entered into a five year employment agreement with Michael Sydow (The “Sydow Employment Agreement”) to serve as NB Regeneration’s Chief Executive Officer.  Upon execution, the Company granted 5,000,000 shares valued, for financial accounting purposes on the grant date at the contemporaneous private placement price of $0.25 per share for a total $1,250,000. The shares vest to Mr. Sydow as follows:   September 1, 2011, 1,000,000 shares; Upon the occurrence of the execution of a binding definitive agreement with Panamanian partners relative to the South American fertilizer project, 2,000,000 shares; 500,000 shares annually on the contract anniversary date years 2-5. In January of 2012 the Company and Mr. Sydow agreed to delay any vesting of stock and options as delineated in the employment pending an amendment to the employment agreement or reshaping of their association. Under ASC 718 "Compensation - Stock Compensation", the Company will recognize the $1,250,000 value as follows: $250,000 on the September 1, 2011 vesting date; $500,000 upon satisfaction of the performance condition; and $500,000 pro rata over the 4 year vesting period. Accordingly, for the nine months ended September 30, 2011, the Company recorded stock-based compensation of $250,000 related to the issuance of the 1,000,000 September 1, 2011 vested common shares.

Common stock issued upon conversion of convertible notes payable

On September 2, 2011, the Company entered into an agreement with the holder of a convertible promissory note that was in default to extinguish the total debt outstanding of $67,402, including accrued interest.  Under the terms of the original agreement, the holder was able to convert the promissory note and interest at $0.0125 per share up to 9.9% of the issued and outstanding Company’s common stock.  The holder agreed to receive 1,600,000 shares of the Company’s common stock and cash of $8,000 as complete settlement for the convertible promissory note.  Pursuant to ASB 470-20-40, since the convertible debt contained an embedded beneficial conversion feature, the amount of the reacquisition price allocated to the repurchased beneficial conversion was measured using the intrinsic value of the beneficial conversion feature at the extinguishment date. Accordingly, the Company recorded a gain on extinguishment of debt of $67,402. The shares received by the holder will be subject to a sales restriction agreement that prohibits the sale, transfer and hypothecation of the subject shares for a twenty-four (24) month period.  

On September 19, 2011, the Company entered into an agreement with the holder of a convertible promissory note to extinguish the total debt outstanding of $29,199, including accrued interest.  Under the terms of the original agreement, the holder was able to convert the promissory note and interest at $0.0125 per share up to 9.9% of the issued and outstanding Company’s common stock.  The holder agreed to receive 1,000,000 shares of the Company’s common stock as complete settlement for the convertible promissory note.  Pursuant to ASB 470-20-40, since the convertible debt contained an embedded beneficial conversion feature, the amount of the reacquisition price allocated to the repurchased beneficial conversion was measured using the intrinsic value of the beneficial conversion feature at the extinguishment date. Accordingly, the Company recorded a gain on extinguishment of debt of $29,199.  The shares received by the holder will be subject to a sales restriction agreement that prohibits the sale, transfer and hypothecation of the subject shares for a twenty-four (24) month period.  

Other

In July 2011, the Company cancelled 250,000 shares of its common stock that were mistakenly issued in 2008.  The shares were tendered by the holder and submitted to the Company’s transfer agent for cancellation. The original amount of $250 was expensed during the year ending December 31, 2008 and this amount is deemed immaterial.

Stock options

In connection with the Sydow Employment Agreement, subject to continued employment, Mr. Sydow was also awarded  2,000,000 common stock options that cliff vest 500,000 per year over four years with first vesting date beginning on January 13, 2012.  However, on January 10, 2012 the Company and Mr. Sydow agreed to delay any vesting of stock and options as delineated in the employment pending an amendment to the employment agreement or reshaping of their association. The options each have a term of one year from the vesting date and have exercise prices of $0.50, $1.00, $1.50 and $2.00 for each 500,000 that vest, respectively.  The value of these options on the grant date was approximately $490,000 based upon the following range of Black-Scholes assumptions; exercise prices from $0.50 to $2.00, volatility from 372% to 448% using actual historical volatility, an expected term based on simplified method from 1 to 2.5 years and discount rate averaging 0.81% and is to be recognized in years one through four, respectively, approximately $121,000, $121,000, $123,000 and $125,000. For the nine months ended September 30, 2011, the Company recorded stock-based compensation expense of $82,248.

On May 16, 2011, the Company entered into a five year employment agreement with Elliot Bellen to serve as the Company’s Chief Executive Officer.  On the employment agreement date, subject to continued employment, Mr. Bellen was awarded  2,000,000 common stock options that cliff vest 500,000 per year over four years with first vesting date on January 1, 2012.  The options each have a term of one year from the vesting date and have exercise prices of $0.50, $1.00, $1.50 and $2.00 for each 500,000 that vest, respectively.  The value of these options on the grant date was approximately $486,000 based upon the following range of Black-Scholes assumptions; Exercise prices from $0.50 to $2.00, volatility from 353% to 430% using actual historical volatility, an expected term based on simplified method from 1 to 2.5 years and discount rate averaging 0.81% and is to be recognized $119,000, $121,000, $122,000 and $124,000 approximately in years one through four, respectively. For the nine months ended September 30, 2011, the Company recorded stock-based compensation expense of $66,952.

At September 30, 2011, there was a total of approximately $826,800 of unrecognized compensation expense related to these non-vested option-based compensation arrangements.

Stock option activity for the nine months ended September 30, 2011 is summarized as follows:

	Nine Months Ended September 30, 2011
	Number of Warrants	Weighted Average Exercise Price
Balance at December 31, 2010	-	-
Granted	4,000,000	1.25
Exercised	-	-
Forfeited	-	-
Balance at September 30, 2011	4,000,000	1.25
Stock options exercisable at September 30, 2011	-	-

The following table summarizes the shares of the Company's common stock issuable upon exercise of stock option outstanding at September 30, 2011:

Stock Options Outstanding						Stock Option Exercisable
	Range of Exercise Price	Number Outstanding at September 30, 2011	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price	Number Exercisable at September 30, 2011		Weighted Average Exercise Price
$	0.50	1,000,000	1.29	$	0.50	-	$	-
$	1.00	1,000,000	2.29		1.00	-		-
$	1.50	1,000,000	3.29		1.50	-		-
$	2.00	1,000,000	4.29		2.00	-		-
		4,000,000	2.79	$	1.25	-	$	-

Warrants

On August 24, 2011, the Company entered into a six month investor relations agreement beginning September 2, 2011 with Rubenstein Investor Relations, (“RIR”) New York.  Under the terms of the agreement, services will commence on September 1, 2011. The agreement calls for a monthly fee of $8,250 per month and two-year warrants to purchase 200,000 shares of the Company’s common stock at $0.80 per share.  These warrants have a term of two years, with cashless exercise provisions.  The Company valued these warrant at $48,773 using the Black-Scholes method and has recorded it as a prepaid expense to be expensed over the term of the contract.  Black-Scholes assumptions were as follows:  stock price of $0.25 based on recent private placement sales, exercise price of $0.80, volatility based on historical volatility of 347.4% expected term of the 2 years based on the contractual term and a discount rate of 0.19%. In connection with issuance of these stock options, the Company recorded professional fees during the nine months ended September 30, 2011 of $8,128 with a remaining prepaid expense at September 30, 2011 of $40,645.

Warrant activity for the nine months ended September 30, 2011 is summarized as follows:

	Nine Months Ended September 30, 2011
	Number of Warrants		Weighted Average Exercise Price
Balance at December 31, 2010	-	$	-
Granted	1,230,000		0.74
Exercised	(110,000)		0.50
Forfeited	(360,000)		0.65
Balance at September 30, 2011	760,000	$	0.81
Warrants exercisable at September 30, 2011	760,000	$	0.81

The following table summarizes the shares of the Company's common stock issuable upon exercise of warrants outstanding at September 30, 2011:

Warrants Outstanding						Warrants Exercisable
	Range of Exercise Price	Number Outstanding at September 30, 2011	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price	Number Exercisable at September 30, 2011		Weighted Average Exercise Price
$	0.50 - 1.00	760,000	0.72		0.81	760,000		0.81
		760,000	0.72	$	0.81	760,000	$	0.81