EQUITY | 6 Months Ended | 12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011 | Dec. 31, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EQUITY |
12. EQUITY
Reverse common stock split. On March 21, 2011, the Company
effected a 200-to-1 reverse split of its shares of common
stock. Immediately prior to the reverse split, the
Company had 2,345,905,633 of its common shares issued and
outstanding which adjusted to 11,729,789 common shares as a result
of the reverse split. The Company retroactively adjusted
the reverse split for all shares issued and
outstanding. As of January 1, 2011, 10,726,440 common
shares were deemed issued and outstanding on a split adjusted
basis.
Increase/Decrease in common shares authorized. On February
11, 2011, the Company increased the amount of its common shares
authorized for issuance from 2.5 billion to 5.0
billion. The amount of common shares authorized was not
adjusted by the March 21, 2011, 200-to-1 reverse stock
split. On July 21, 2011, the Company reduced the amount
of common shares authorized from 5.0 billion to 500
million.
Sale of common shares and warrants. In March 2011, the
Company sold 15,000 shares of common stock and issued warrants to
purchase 400,000 shares of common stock (shares and warrants after
consideration of the 200-to-1 reverse stock split) for cash
proceeds of $60,000 and paid professional fees of $3,000 related to
this transaction. The shares were valued at $4,500, or
$0.30 per share. The warrants have an exercise price of
$0.0001 and expire seven years from the date of
issuance. The Company valued the warrants on the date of
sale using the Black- Scholes pricing model at $153,000, but did
not record this value.
In
June 2011, the Company sold an aggregate of 242,424 shares of
common stock for cash proceeds of $50,000.
Warrants for common shares. During
the six months ended June 30, 2011, the Company granted or sold an
aggregate of 4,304,311 warrants (warrants after consideration of
the 200-to-1 reverse stock split) to purchase an equivalent number
of shares of common stock. These warrants are
exercisable over five to seven years and have exercise prices that
vary from $0.0001 to $200 per share. In June 2011,
a warrant holder exercised warrants to purchase 224,108 common
shares for $22 at $0.0001 per share. The Company issued
these shares on July 19, 2011. A summary of the status
of the Company’s outstanding common stock warrants as of and
for the three months ended June 30, 2011, excluding warrants
issuable as contingent compensation, is as follows:
As
of June 30, 2011, warrants to purchase 4,606,196 shares of the
Company’s common stock contain a cashless exercise option
based on the fair market value of the Company’s stock on the
date of exercise. Warrants to purchase 3,525,000 shares
of the Company’s common stock contain provisions, whereby the
exercise price for the warrants adjusts proportionally with
additional sales of equity below certain prices. All
warrants outstanding at June 30, 2011, contain other anti-dilution
provisions should the Company become re-capitalized, incur
adjustments for any reorganization, consolidation or merger, and
other rights offering participation.
Equity purchase agreement and issuance of Series A preferred
stock. On February 3,
2011, the Company entered into an equity purchase agreement (the
“Purchase Agreement”) with Southridge Partners II, LP
(“Southridge”). Pursuant to the Purchase
Agreement, Southridge agreed to purchase from the Company, for a
period of up to 24 months commencing on the effective date of a
registration statement filed by the Company for resale of the
shares, up to $10,000,000 shares of the Company’s common
stock. The purchase price for the shares of common stock
sold will be equal to 92% of the average of the lowest 2 daily
closing prices for the 5 trading days immediately following the
date on which the Company is deemed to provide a put notice under
the Purchase Agreement. The maximum amount of common
stock that Southridge shall be obligated to purchase with respect
to any single closing under the Purchase Agreement will be the
lesser of $500,000 or 250% of the average dollar trading volume of
the Company’s common stock for the 20 trading days
immediately preceding the date on which the Company provides a put
notice under the Purchase Agreement. To date, the
Company has not completed the registration process and therefore is
unable to put shares under the Purchase Agreement.
Upon
execution of the Purchase Agreement, the Company issued Southridge
a five-year warrant to purchase 25,000,000 shares of common stock
(125,000 shares after consideration of the 200-to-1 reverse stock
split) at an exercise price of $0.00615 ($1.23 per share after
consideration of the 200-to-1 reverse stock split), which may be
exercised on a cashless basis if there is no effective registration
statement for the resale of shares of common stock underlying the
warrant six month following the issuance. These warrants
were valued using the Black-Scholes pricing model at $112,303 and
were expensed as other expense in consolidated statement of
operations
The
Company agreed to issue to its management and directors a series of
preferred stock with voting rights sufficient to grant such holders
the ability to vote in favor of an increase in the Company’s
authorized common stock and/or a reverse split of the outstanding
shares of common stock. Accordingly, on February 4,
2011, the Company issued to each of its four directors 12,500
shares each of its Series A Preferred Stock. On February
11, 2011, the Company increased the number of authorized shares of
its common stock from 2.5 billion to 5.0 billion. In the
aggregate, the Company issued 50,000 of its Series A Preferred
Stock, which gave each of the holders 100,000 votes for each share
of preferred stock owned. The Series A Preferred Stock
is non-participating in any dividends, is not convertible and has a
liquidation provision on a pari passu basis with the common
shares. The four members of the Company’s Board of
Directors jointly held 5.0 billion votes immediately before and
after the 200-to-1 reverse common stock split. As of the
date of issuance, an independent valuation specialist determined
the 50,000 shares of Series A Preferred Stock to be $12,800, and
the Company recognized compensation expense to the directors
accordingly.
Share Based Compensation
Common stock issued for services to
non-employees. During the six months ended June
30, 2011, the Company issued 1,839,414 shares of its common stock
to various service providers for legal, public relations and
accounting services. These shares were valued in the
aggregate at $927,213 based on the closing price of the
Company’s common stock on their respective dates of
issuance. Included in these share issuances were 390,000
common shares valued at $244,800 which were issued in satisfaction
of trade payables as the expense for services was recognized in a
prior period.
Incentive Stock Plan. In January 2011, the Company’s
Board of Directors approved the American Scientific Resources 2011
Incentive Stock Plan which allocates up to 100,000,000 shares (now
500,000 shares after the March 21, 2011, 200-to-1 reverse common
stock split) of common stock for awards to directors, officers,
selected employees and consultants as qualified and non-qualified
stock options, and as restricted and non-restricted stock
awards. To date, the Company has awarded 481,766 shares
(shares after 200-to-1 reserve stock split) under this plan to
date.
Stock Option Plan.
In June 2011, the Company’s Board of Directors approved a
stock option plan authorizing the award of up to 100,000,000
options to purchase common shares as incentive stock options or
non-qualified stock options at exercise prices, vesting periods and
terms (up to 10 years) as determined by the Board of Directors or a
designated committee. In June 2011, the Board of
Directors awarded 5,295,000 options to directors, employees and
consultants, exercisable at $0.40 per share over 5 years with
immediate vesting as compensation for past services. The
closing market price of the Company’s common stock on the
award date was $0.32 per share. Based on application of
the Black Sholes pricing model, the Company determined the value of
the options awarded to be $1,691,126 and expensed this amount as
operating, sales and administrative expenses on the date of
grant.
Obligation to Issue Common Shares
A
summary of the Company’s obligations to issue common shares
as recorded in these consolidated financial statements at June 30,
2011 and December 31, 2010, is as follows:
In
June 2011, a warrant holder exercised warrants to purchase 224,108
common shares for $22 and the Company issued these shares on July
19, 2011.
At
June 30, 2011, in addition to the amounts in the above table, the
Company has potentially dilutive securities consisting of
convertible securities, commitments, warrant agreements, employment
agreements and other agreements that could obligate the Company to
issue up to 14,047,960 additional common shares.
|
11. EQUITY
Sale of common shares. In January 2010,
the Company sold 12,686,567 shares of common stock for cash
proceeds of $85,000 and paid a selling commission of
$6,800. Of the $85,000 total proceeds received from this
issuance, $5,000 was advanced to the Company in December 2009 and
recorded as an obligation to issue common stock.
In
November 2010, the Company sold 15,000,000 shares of common stock
for cash proceeds of $50,000.
On
February 11, 2011, the Company increased the number of shares of
its authorized common stock from 2.5 billion to 5.0
billion. On March 21, 2011, the Company effected a
200-to-1 reverse split of its common stock shares.
Warrants for common shares. During
the year December 31, 2010, the Company granted 99,185,723 warrants
to purchase an equivalent number of shares of common stock to
investors and consultants in connection with convertible debenture
issuances. These warrants are exercisable over three to
seven year periods at exercise prices ranging from $0.004 to $1.00
per share. A summary of the status of the
Company’s outstanding common stock warrants as of and for the
year ended December 31, 2010, excluding warrants issuable as
contingent compensation, is as follows:
As
of December 31, 2010, warrants to purchase 105,618,844 shares of
the Company’s common stock contain a cashless exercise option
based on the fair market value of the Company’s stock on the
date of exercise. Warrants to purchase 96,843,844 shares
of the Company’s common stock contain provisions whereby the
exercise price for the warrants adjusts proportionally with
additional sales of equity (see Note 8 – Notes Payable
– Dilution adjustments). All warrants outstanding
at December 31, 2010 contain other anti-dilution provisions should
the Company become re-capitalized, incur adjustments for any
reorganization, consolidation or merger, and other rights offering
participation.
Options for purchase of common stock. In May
2007, the Company adopted a stock option plan which provides for
the grant of options to officers, consultants and employees to
acquire shares of the Company’s common stock at a purchase
price equal to or greater than the fair market value as of the date
of the grant. Options are exercisable six months
after the grant date and expire five years from the grant
date. The plan calls for a total of 3,000,000 common
shares to be held for grant. No options had been granted
under this plan.
Share Based Compensation
Common stock issued for services to
non-employees. In June 2009, the Company issued
8,000,000 restricted shares of its common stock and 8,000,000
warrants to purchase an equivalent number of common shares to an
entity for services rendered. These services were valued
at $33,580 based on the fair value of the common stock ($31,200)
and warrants ($2,380) on the date of issuance. In
October 2009, the service provider filed suit against the Company,
its directors and other parties for failure to register and lift
trading restrictions on the common stock. The service
provider claimed damages arising from the alleged inability to sell
the shares timely and realize certain profits. Further,
the service provider claimed anticipatory damages from alleged
anticipated inability to sell certain other shares and the
warrants. In February 2010, the Company settled this
litigation and issued 16,000,000 unrestricted shares of its common
stock and cancelled the originally issued shares and
warrants. On December 31, 2009, the Company recognized
an incremental expense from the settlement in the amount of
$68,000, based on the closing bid price of the common stock on the
date of settlement, and a corresponding obligation to issue common
stock. The Company also reversed the value of the
warrants cancelled in the amount of $2,380.
In
February 2010, the Company issued 1,000,000 restricted shares of
common stock as payment for consulting services. These
shares were valued at the closing bid price for the Company’s
common stock on the date of issuance amounting to $8,200, which was
expensed.
In
April 2010, the Company issued 10,000,000 restricted shares of
common stock for investor relations and other consulting services
to be performed over a six month period valued at $152,000 based on
the closing bid price of our common shares on the date of
issuance. For the year ended December 31, 2010, the
Company amortized $152,000 as operating, sales and administrative
expenses.
In
June 2010, the Company issued 10,000,000 restricted shares of
common stock to five service providers for product development,
legal, accounting and consulting services. These shares
valued at the closing bid price for our common shares on the date
of issuance amounting to $96,000, which was expensed.
In
September 2010, the Company issued 6,000,000 shares to a law firm
for legal services rendered. These shares valued at the closing bid
price for our common shares on the date of issuance amounting to
$54,000, which was expensed.
In
October 2010, the Company issued 5,000,000 shares to a Chinese
manufacturer of the Company’s products. These
shares were valued at $42,000 based on the closing bid price of our
common shares on the date of issuance. This amount was
expensed to operating, sales and administrative
expenses.
See
Note 12– Commitments and Contingencies – Service
agreements for additional information regarding shares issued and
issuable to employees.
Common stock issued to employees. In June 2010, the Company
issued 2,000,000 restricted shares of common stock to an employee
for services rendered. These shares valued at the
closing bid price for our common shares on the date of issuance
amounting to $19,200, which was expensed.
In
August 2010, the Company issued 40,000,000 shares to four members
of our Board of Directors. These shares valued at the closing bid
price for our common shares on the date of issuance amounting to
$400,000, which was expensed.
See
Note 12 – Commitments and Contingencies – Employment
agreements for additional information regarding shares issued and
issuable to employees.
Obligation to Issue Common Shares
A
summary of the Company’s obligations to issue common shares
as recorded in these consolidated financial statements at December
31, 2010 and 2009, is as follows:
At
December 31, 2010, in addition to the amounts in the above table,
the Company has convertible securities, commitments, warrant
agreements, employment agreements and other agreements that could
obligate the Company to issue up to 1,239,939,699 additional common
shares.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||