Equity

9 Months Ended

Aug. 31, 2013

Equity [Abstract]

Equity

Note 12 – Equity

As discussed in Note 9, we entered into various transactions where we issued convertible notes to third parties in exchange for existing notes payable with various lenders. Such convertible notes allowed the new debt holders to convert outstanding debt principal into shares of the Company’s common stock at a discount to the trading price of the common stock. To the extent, if any, that there was a beneficial conversion feature associated with these debts, the beneficial conversion feature was bifurcated from the host instrument and accounted for as a freestanding derivative. As a result of such conversions, during the first quarter of fiscal 2013 a total of $195,903 of outstanding debt principal was converted into 122,217,067 shares of the Company’s common stock. During the second quarter of fiscal 2013, a total of $289,007 of outstanding debt principal was converted into 143,766,382 shares of the Company’s common stock. During the third quarter of fiscal 2013, a total of $303,880 of outstanding debt principal was converted into 134,568,734 shares of the Company’s common stock.

During the first quarter of fiscal 2013, one debt holder converted outstanding debt payable of $75,000 into 2,500,000 shares of our common stock, a second converted a debt payable of $6,000 into 6,000,000 shares of our common stock and a third converted a debt payable of $25,000 into 5,000,000 shares of our common stock. During the second quarter of fiscal 2013, one debt holder converted outstanding debt payable of $361,592 into 67,260,000 shares of our common stock. A second debt holder converted outstanding debt payable of $12,500 for 5,000,000 shares of our common stock. During the third quarter of fiscal 2013, one holder of convertible debt converted outstanding debt payable of $19,000 for 9,500,000 shares of our common stock.

On August 30, 2013, the Company filed a certificate of amendment of its certificate of incorporation in which the Board of Directors designated a Series D of the Company’s previously authorized preferred stock with a par value per share of $0.001 (the “Series D Preferred”). The number of shares of Series D Preferred was set at 51 shares. The Series D Preferred shares have dividend rights equal to common stock on a share-for-share basis, but no liquidation rights. Each one (1) share of the Series D Preferred has voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding shares of Common Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator. As a result, the holders of the Series D Preferred Stock have voting control of the Company.

All 51 shares of the Series D Preferred were issued to the Company’s chief executive officer and chief information officer (the “Officers”) in exchange for the 51 outstanding shares of the Company’s Series C Preferred Stock held by the Officers. The terms of the Series D Preferred Stock are substantially identical to the terms of the Series C Preferred Stock, except that the redemption date has been changed. The Company shall redeem all shares of Series D Preferred, in cash, for $1.00 per share on the earlier to occur of (1) the first anniversary of the date upon which all obligations of the Company to 112359 Factor Fund, LLC (and/or its assign(s)) have been satisfied in full, or (2) December 31, 2019.