Capital Stock

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Note 13. Capital Stock

Preferred Stock

The Company has authorized 25,000,000 shares of preferred stock, of which 20,500,000 is designated as Series B Convertible Preferred Stock, $0.01 par value, with a stated value of approximately $204,000 (“Series B Preferred”). The remaining 4,500,000 authorized preferred shares have not been designated by the Company as of December 31, 2012.

On November 19, 2010, the Company filed a Certificate of Withdrawal of the Certificates of Designations of the Series A Preferred Stock (“Series A Preferred”) with the Nevada Secretary of State, as there were no shares of Series A Preferred issued and outstanding after the exchange transaction discussed below.

Series A-1 Preferred Stock

In October 2010, the Company entered into certain agreements with certain investors, pursuant to which the Company exchanged substantially all of its equity interest in FluoraPharma and shares of newly created Series B Preferred for and in consideration for cash aggregating $789,704, and the termination of certain shares of Series A-1 Preferred Stock (“Series A-1 Preferred”) with a stated value of approximately $4.45 million (the “Exchange”), including accrued and unpaid dividends of $63.186. Contemporaneously with the consummation of the Exchange, on November 19, 2010, the Company filed a Certificate of Withdrawal of the Certificates of Designations of the Series A Preferred with the Nevada Secretary of State, as no shares or such preferred stock were issued and outstanding following the Exchange.

Series B Convertible Preferred Stock

The Company has authorized 20,500,000 shares of Series B Preferred, $0.01 par value. The Series B Preferred ranks prior to the common stock for purposes of liquidation preference, and to all other classes and series of equity securities of the Company that by their terms did not rank senior to the Series B Preferred (“Junior Stock”). Holders of the Series B Preferred are entitled to receive cash dividends, when, as and if declared by the Board of Directors, and they shall be entitled to receive an amount equal to the cash dividend declared on one share of Common Stock multiplied by the number of shares of Common Stock equal to the outstanding shares of Series B Preferred, on an as converted basis. The holders of Series B Preferred have voting rights to vote as a class on matters a) amending, altering or repealing the provisions of the Series B Preferred so as to adversely affect any right, preference, privilege or voting power of the Series B Preferred; or b) to effect any distribution with respect to Junior stock. At any time, the holders of Series B Preferred may, subject to limitations, elect to convert all or any portion of their Series B Preferred into fully paid nonassessable shares of common stock at a 1:1 conversion rate.

In December 2010, the Company issued 17,916,228 shares of its Series B Preferred in exchange for 3,583,246 shares of Series A-1 Preferred. In May 2011, the Company issued 2,500,000 shares of its Series B Preferred to its financial advisor, with a deemed value of $37,500, for and in consideration for past professional services provided the Company, consisting of financial advisory, strategic consulting, litigation support, among other services. At December 31, 2012, the Company had 20,416,228 shares of Series B Preferred issued and outstanding with a liquidation preference of $204,162, and convertible into 20,416,228 shares of common stock.

Common Stock

The Company has authorized 150,000,000 shares of its common stock, $0.01 par value. The Company had issued and outstanding 52,528,644 and 47,377,630 shares of its common stock at December 31, 2012 and 2011. In December 2009, the shareholders of the Company approved an increase to authorized common stock to 150,000,000 shares. The increase took effect in January 2010 with the filing of the amendment to the articles of incorporation with the State of Nevada.

During the year ended December 31, 2012, the Company issued 900,000 shares of common stock related to settlement agreements, 1,732,015 shares of common stock in connection with debt financing, 2,018,999 shares of common stock in connection with a financial services agreement, 450,000 shares of common stock as compensation to each of its two board members and 50,000 shares of common stock in exchange for warrants. At December 31, 2012, the Company had reserved for issuance a total of 2,000,000 shares of common stock valued at $82,500, including 200,000 shares to be issued in connection with debt financing, and 1,800,000 shares of common stock to be issued in exchange for warrants related to a financial services agreement.

During the year ended December 31, 2011, the Company issued 2,069,000 shares of common stock in exchange for outstanding warrants in connection with debt financing, 500,000 shares of common stock to each of its two board members, and 500,000 shares of common stock to an advisor to the board of directors, 1,031,967 shares of common stock related to the 2011 Notes and 900,000 shares of common stock pursuant to settlement of accounts payable valued at $43,000.