Note 8. Common Stock

9 Months Ended

Sep. 30, 2014

Notes

Note 8. Common Stock

Note 8.            Common Stock

In December 2010, the Company executed a Financial Public Relations Agreement with Strategic Asset Management, Inc., or SAMI.  The Company engaged SAMI as its non-exclusive financial public relations consultant for a term of three years.  For its services, the Company issued SAMI 150,000 shares of the Company's unregistered common stock.  The Company recorded a non-cash charge to earnings of approximately $305,000 ratably over a 36-month period starting in December 2010.  For the nine months ended September 30, 2014 and 2013, the charge to earnings was approximately $0 and $76,100, respectively.  For the three months ended September 30, 2014 and 2013, the charge to earnings was approximately $0 and $25,400, respectively.

In August 2011, the Company issued 100,000 shares of common stock and granted 100,000 stock warrants to SAMI for additional services performed in connection with the December 2010 Financial Public Relations Agreement.  To reflect the entire value of the stock and warrants issued, the Company recorded a non-cash charge to earnings of $285,700 through December 2013, the ending date of the agreement.  For the nine months ended September 30, 2014 and 2013, the charge to earnings was approximately $0 and $71,400, respectively.  For the three months ended September 30, 2014 and 2013, the charge to earnings was approximately $0 and $23,800, respectively.

In October 2012, the Company issued 300,000 shares of common stock and granted 150,000 stock warrants to SAMI to extend the period of services performed in connection with the December 2010 Financial Public Relations Agreement for an additional two years, through December 2015.  To reflect the entire value of the stock and warrants issued, the Company is recording a non-cash charge to earnings of $421,300 starting in 2013, over a 36 month period.  For the nine months ended September 30, 2014 and 2013, the charge to earnings was approximately $102,500 and $125,200, respectively.  For both the three months ended September 30, 2014 and 2013, the charge to earnings was approximately $34,200.

In January 2013, the Company issued 70,000 shares of unregistered common stock to Webracadabra Internet Works, LLC, dba Oregon Resource Innovations, for financial consulting services to be performed over a six month period.  To reflect the entire value of the stock issued, the Company recorded a non-cash charge to earnings of $70,000 ratably through July 2013, the ending date of the agreement.  For the nine months ended September 30, 2014 and 2013 the charge to earnings was $0 and $70,000, respectively.  For the three months ended September 30, 2014 and 2013 the charge to earnings was $0 and $2,600, respectively.

In April 2013, the Company executed a Consulting Agreement with Rakgear, Inc.  The Company engaged Rakgear to provide financial consulting services for a term of one year.  For its services, the Company issued Rakgear 150,000 shares of the Company's unregistered common stock and 150,000 warrants to purchase unregistered shares of common stock at a price of $1.49 per warrant.  To reflect the entire value of the stock issued, the Company recorded a non-cash charge to earnings of $487,900 ratably through March 2014, the ending date of the agreement.  For the nine months ended September 30, 2014 and 2013 the charge to earnings was approximately $122,000 and $243,000, respectively.  For the three months ended September 30, 2014 and 2013 the charge to earnings was approximately $0 and $122,000, respectively.

Effective September 15, 2014, the Company executed a Financial Public Relations Agreement with Dynasty Wealth, Inc., for a one year term.  For its services, the Company issued Dynasty Wealth 350,000 warrants to purchase the Company's unregistered common stock and at an exercise price of $1.50 per share, and $10,000 per month, to be paid in either cash or shares of the Company’s unregistered common stock at the Company’s discretion.  To reflect the entire value of the warrants issued, the Company is recording a non-cash charge to earnings of $460,700 ratably through September 14, 2015, the ending date of the agreement.  For both the nine months and three months ended September 30, 2014 the charge to earnings for just the non-cash portion of the agreement was approximately $19,200.

In May 2013, the Company issued a total of 3,845 shares of unregistered common stock, valued at a total of $5,000, to five independent directors in lieu of cash owed for a board meeting attended.  To reflect the value of the stock issued, the Company recorded a charge to earnings totaling $5,000 in the second quarter of 2013.

In April 2014, the Company issued a total of 6,175 shares of unregistered common stock, valued at a total of $5,000, to five independent directors in lieu of cash owed for a board meeting attended.  To reflect the value of the stock issued, the Company recorded a charge to earnings totaling $5,000 in the second quarter of 2014.

In June 2014, the Company issued a total of 9,212 shares of unregistered common stock, valued at a total of $7,000, to seven independent directors in lieu of cash owed for a board meeting attended.  To reflect the value of the stock issued, the Company recorded a charge to earnings totaling $7,000 in the second quarter of 2014.

In August 2014, the Company issued a total of 4,760 shares of unregistered common stock, valued at a total of $7,000, to seven independent directors in lieu of cash owed for a board meeting attended.  To reflect the value of the stock issued, the Company recorded a charge to earnings totaling $7,000 in the third quarter of 2014.

In August 2014 the Company issued Deerpoint Development Company Ltd., the landlord of its administrative office, 16,200 shares of unregistered common stock at a price of $0.71 per share in exchange for three months rent, resulting in net additional expense of approximately $1,300 above the contracted amount, but saving us approximately $10,200 of cash.  The stock price was calculated using the Black-Scholes valuation model.  More information on this valuation method can be found in Note 9, “Stock Options”.

In December 2013, the Company borrowed a total of $55,000 from one of the Company’s board members and an existing stockholder to provide operating capital.  Both Notes Payable were for a term of three months at an interest rate of 12% and included warrants to purchase unregistered common stock of the Company.  During the second quarter of 2014, both individuals converted their respective Note to common stock at the fair market value of the stock at the time of each conversion, and each received warrants to purchase unregistered common stock of the Company.

In April 2014, the Company entered into a share purchase agreement with one of the Company’s board members (“Purchaser”), pursuant to which the Company sold 71,429 shares of its common stock (the “Shares”) to the Purchaser for $50,000, or a purchase price of $0.70 per Share, and 71,429 warrants to purchase common stock.  The Shares are restricted and the transaction was exempt from the registration requirements under the Securities Act pursuant to section 4(a)(2) as a transaction by an issuer not involving a public offering.

In April 2014, the Company entered into a share purchase agreement with one of the Company’s board members (“Purchaser”), pursuant to which the Company sold 25,000 shares of its common stock (the “Shares”) to the Purchaser for $17,500, or a purchase price of $0.70 per Share, and 25,000 warrants to purchase common stock.  The Shares are restricted and the transaction was exempt from the registration requirements under the Securities Act pursuant to section 4(a)(2) as a transaction by an issuer not involving a public offering.

In May 2014, the Company entered into a share purchase agreement with one of the Company’s board members (“Purchaser”), pursuant to which the Company sold 37,313 shares of its common stock (the “Shares”) to the Purchaser for $25,000, or a purchase price of $0.67 per Share, and 37,313 warrants to purchase common stock.  The Shares are restricted and the transaction was exempt from the registration requirements under the Securities Act pursuant to section 4(a)(2) as a transaction by an issuer not involving a public offering.

            During June through September 2014, the Company entered into share purchase agreements with a total of seven Purchasers pursuant to which the Company sold 275,500 shares of its common stock (the “Shares”) to the Purchasers for a total of $275,500, or a purchase price of $1.00 per Share.  The Shares are restricted and have limited “piggy-back” registration rights in connection with certain registration statement filings of the Company under the Securities Act of 1933 as amended (the “Securities Act”).  All of the transactions were exempt from the registration requirements under the Securities Act pursuant to section 4(a)(2) as a transaction by an issuer not involving a public offering.