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Stockholders' Equity
 12 Months Ended
Dec. 31, 2011
Notes to Financial Statements  
Stockholders' Equity

 

8. Stockholders' Equity 

Issuance of Common Stock for Cash 

In 2011, 2010, and 2009, the Company sold an aggregate of 3,041,918, 3,492,502, and 5,600,234 shares, respectively, of its unregistered common stock to existing stockholders and other parties for $1,160,217, $799,522 and $1,122,243, respectively. In connection with sales of the Company’s common stock in 2010, 350,000 warrants to purchase shares of the Company’s common stock (200,000 for $0.30 per share and 150,000 for $0.40) were issued. No warrants to purchase shares of the Company’s common stock were granted in 2011or 2009. 

Issuance of Common Stock for Services and Property 

During 2011, the Company declared, but did not issue 95,835 shares of unregistered common stock to be paid to its directors for services, having a fair value of $230,004, based on the current stock price at the date declared. This expense is classified with general and administrative expense in the consolidated statement of operations. 

During 2010 and 2009, the Company awarded 260,000 and 130,000 shares, respectively, of unregistered common stock to its directors for services, having fair values of $117,000 and $39,000, respectively, based on the current stock price at date of grant. The expense is classified as general and administrative expense in the consolidated statement of operations. 

Common Stock Warrants 

The Company's Board of Directors has the authority to issue stock warrants for the purchase of preferred or unregistered common stock to directors and employees of the Company. 

Transactions in common stock warrants are as follows: 

   Number of  Exercise
   Warrants  Prices
Balance, December 31, 2009   921,734    $0.20-$0.75
   Granted in connection with sales of common stock   350,000    $0.30-$0.40
Warrants expired and cancelled   (546,734)   $0.30-$0.60
Balance, December 31, 2010   725,000    $0.20-$0.75
Warrants exercised   (125,000)   $0.20-$0.75
Balance, December 31, 2011   600,000    $0.20-$0.75
      
The above common stock warrants expire as follows:     
 
Year Ended December 31:		     
2012   350,000 
Thereafter   250,000 
    600,000 

 

Preferred Stock 

 The Company's Articles of Incorporation authorize 10,000,000 shares of $0.01 par value preferred stock available for issuance with such rights and preferences, including liquidation, dividend, conversion, and voting rights, as the Board of Directors may determine. 

 Series B 

 During 1993, the Board established a Series B preferred stock, consisting of 750,000 shares. The Series B preferred stock has preference over the Company's common stock and Series A preferred stock; has no voting rights (absent default in payment of declared dividends); and is entitled to cumulative dividends of $0.01 per share per year, payable if and when declared by the Board of Directors. In the event of dissolution or liquidation of the Company, the preferential amount payable to Series B preferred stockholders is $1.00 per share plus dividends in arrears. No dividends have been declared or paid with respect to the Series B preferred stock. At December 31, 2011, cumulative dividends in arrears on the outstanding Series B shares were $127,500 or $0.17 per share. At December 31, 2010, cumulative dividends in arrears on the outstanding Series B shares were $120,000, or $0.16 per share. 

 Series C 

During 2000, the Board established a Series C preferred stock, consisting of 205,996 shares. The Series C preferred stock has preference over the Company’s common stock and has voting rights, but no dividend rights. In the event of dissolution or liquidation of the Company, the preferential amount payable to Series C preferred stockholders is $0.55 per share. 

Series D 

During 2002, the Board established a Series D preferred stock, authorizing the issuance of up to 2,500,000 shares. The Series D preferred stock has preference over the Company’s common stock but is subordinate to the liquidation preferences of the holders of the Company’s outstanding Series A, Series B and Series C preferred stock. Series D preferred stock carries voting rights and is entitled to annual dividends of $0.0235 per share. The dividends are cumulative and payable after payment and satisfaction of the Series A, B and C preferred stock dividends. No dividends have been declared or paid with respect to the Series D preferred stock. At December 31, 2011 and 2010, cumulative dividends in arrears on the 1,751,005 outstanding Series D shares were $336,920 and $295,771, respectively, payable if and when declared by the Board of Directors. In the event of dissolution or liquidation of the Company, the preferential amount payable to Series D preferred stockholders is $2.50 per share. At December 31, 2011 and 2010, the liquidation preference for Series D preferred stock was $4,377,513. Holders of the Series D preferred stock have the right, subject to the availability of authorized but unissued common stock, to convert their shares at $0.20 into shares of the Company's common stock without payment of additional consideration and are not redeemable unless by mutual consent. The majority of Series D preferred shares are held by John Lawrence, president of the Company.