Stockholder’s Deficit

6 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Stockholder’s Deficit

NOTE 6 – Stockholder’s Deficit

Net loss per common share for 2011 and 2010 has been computed by dividing net loss, after preferred stock dividend provision of $3,043 for the six months ended June 30, 2011 and 2010, and $1,522 for the three months ended June 30, 2011 and 2010, by the basic and diluted weighted average number of common shares outstanding for respective periods.

Our obligation to issue shares of our Common Stock upon conversion of our Convertible Debentures and preferred stock is essentially limitless. As such we would not have sufficient shares of authorized Common Stock to convert all of the outstanding Convertible Debentures and preferred stock. This could affect our ability to raise additional funds.

Preferred Stock

According to the Company’s corporate charter, 500,000,000 shares of preferred stock have been authorized for issuance.  As of June 30, 2011, 106,960,357 have been designated for the Company’s five classes of preferred stock.

12% Non-Voting Convertible Preferred Stock

The Company's 12% non-voting convertible preferred stock (“Preferred Stock”) entitles the holder to annual dividends of $.24 per share payable quarterly on March 1, June 1, September 1, December 1 in cash or Common Stock of the Company having an equivalent fair market value. At June 30, 2011 and December 31, 2010, 25,357 shares of the Non-Voting Preferred Stock were outstanding.

On February 7, 2011, the Board of Directors authorized the issuance of shares of the Company's Common Stock or cash, which shall be at the discretion of the Chief Executive Officer in order to pay the accrued preferred stock dividends. Accrued and unpaid dividends at June 30, 2011 were $56,283. Dividends will accumulate until such time as earned surplus is available to pay a cash dividend or until a post effective amendment to the Company's registration statement covering a certain number of common shares reserved for the payment of Preferred Stock dividends is filed and declared effective, or if such number of common shares are insufficient to pay cumulative dividends, then until additional common shares are registered with the SEC.

The Company's Preferred Stock is convertible into shares of Common Stock at a rate of two shares of Common Stock (subject to adjustments) for each share of Preferred Stock, at the option of the Company, at any time on not less than 30 days' written or published notice to the Preferred Stockholders of record, at a price $2.00 per share (plus all accrued and unpaid dividends). The holders of the Preferred Stock have the opportunity to convert shares of Preferred Stock into Common Stock during the notice period. The Company does not have nor does it intend to establish a sinking fund for the redemption of the Preferred Stock.  As adjusted, the aggregate outstanding shares of Preferred Stock would currently be converted into a total of fifteen shares of Common Stock.

Series B Voting Convertible Preferred Stock

The Company filed a Certificate of Designation of Series B Convertible Preferred Stock (“Series B Preferred Stock”) on January 4, 2006, pursuant to which the Company authorized for issuance 135,000 shares of Series B Preferred Stock, par value $0.10 per share. The holders of the Series B Preferred Stock have the right to convert the Series B Preferred Stock into share of the Company’s Common Stock by dividing the Liquidation Preference ($20 per share) by the Conversion Price, which is equal to the weighted average price of the Common Stock as reported by Bloomberg for the ten (10) consecutive trading days prior to the conversion date. The holders of the Series B Preferred Stock shall have the right to vote together with the holders of the Corporation’s Common Stock on all matters presented to the holders of the Common Stock, and not as a separate class, on the basis of 30 votes per share. The foregoing holders were existing investors before they did the exchange. Shares of Series B Preferred Stock are convertible into shares of Common Stock of the Company at a conversion price which is equal to 50% of the closing bid price of the Company’s Common Stock. At June 30, 2011 and December 31, 2010, 106,294 shares of the Series B Preferred Stock were outstanding.

Series C Voting Convertible Preferred Stock

The Company filed a Certificate of Designation of Series C Convertible Preferred Stock on March 23, 2006, pursuant to which the Company authorized for issuance 300,000 shares of Series C Preferred Stock, par value $0.10 per share, which shares are convertible after (i) the market price of the Common Stock is above $1.00 per share; (ii) the Company’s Common Stock is trading on the OTCBB market or the AMEX; (iii) the Company is in good standing; (iv) the Company must have more than 500 stockholders; (v) the Company must have annual revenue of at least four million dollars; (vi) the Company has at least $100,000 EBITDA for the fiscal year preceding the conversion request. The holders of the Series C Preferred Stock shall have the right to vote together with the holders of the Corporation’s Common Stock, on a 30 votes per share basis (and not as a separate class), on matters presented to the holders of the Common Stock.  The Company issued 220,000 shares of Series C Preferred Stock to its President. At June 30, 2011 and December 31, 2010, 300,000 shares of the Series C Preferred Stock were outstanding.

Series D Voting Non-Convertible Preferred Stock

The Company filed a Certificate of Designation of Series D Preferred Stock on February 5, 2007 and a Certificate of Change of Number of Authorized Shares and Par Value of Series D Preferred Stock on March 26, 2007, pursuant to which the Company authorized for issuance 6,500,000 of shares of Series D Preferred Stock, par value $0.001 per share.   Holders of the Series D Preferred Stock have the right to vote together with holders of the Company’s Common Stock, on a 60-votes-per-share basis (and not as a separate class), on all matters presented to the holders of the Common Stock.  The shares of Series D Preferred Stock are not convertible into Common Stock of the Company.  The Company issued 6,500,000 shares Series D Preferred Stock to the Company’s to its President all of which were outstanding at June 30, 2011and December 31, 2010.

Series E Voting Non-Convertible Preferred Stock

On July 7, 2009 the Board of Directors unanimously approved for issuance 100,000,000 shares of Series E Preferred Stock, par value $0.001 per share The Company filed a Certificate of Designation of Series E Preferred Stock (”Series E Preferred Stock”) on July 10, 2009. Holders of Series E Preferred Stock have the right to vote together with holders of the Company’s Common Stock, on the basis of 95 votes per share, not as a separate class, on all matters presented to the holders of the Common Stock. The shares of the Series E Preferred Stock are not convertible into Common Stock of the Company. The Company issued 31,000,000 shares of Series E Preferred Stock, valued at $31,000, to the President as partial settlement for accrued compensation all of which were outstanding at June 30, 2011 and December 31, 2010. In July 2011, the Company issued an additional 56,000,000 shares of Series E Preferred Stock, valued at $56,000, to the President as partial settlement for accrued compensation.

Warrants

A summary of warrants outstanding at June 30, 2011:

Warrants	Date Issued	Expiration Date	Price
230	Various	Various thru 6/19/15	$500 - $13,000
70,000	7/29/08	7/29/15	$2.50
100,000	9/24/08	9/24/15	$0.50
50,000	11/5/08	11/5/15	$0.50
180,000	12/3/08	12/3/15	$0.50
100,000	12/5/08	12/5/15	$0.25
500,230