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11. Stockholder's Equity
 12 Months Ended
Dec. 31, 2013
Equity [Abstract]  
Stockholder's Equity

Issuance of Common Stock for Cash

 

In 2013, 2012, and 2011, the Company sold an aggregate of 1,139,480, 2,156,334, and 3,041,918 shares, respectively, of its unregistered common stock to existing stockholders and other parties for $1,147,195, $4,624,763, and $1,160,217, respectively.  In connection with sales of the Company’s common stock in 2013 and 2012, there were 629,740 and 1,734,667 warrants issued, respectively, to purchase shares of the Company’s common stock. No warrants to purchase shares of the Company’s common stock were granted in 2011.

 

Issuance of Common Stock for Notes Payable

 

In the fourth quarter of 2013, the Company borrowed $150,000 from Mr. and Mrs. Robert Detwiler, stockholders of the Company. Prior to the end of 2013, the Detwiler’s converted their notes into 120,000 shares common stock and 60,000 stock purchase warrants. The terms of the conversion were identical to those offered other investors that purchased common stock and warrants near the time of the conversion and no gain or loss on the conversion resulted.

 

Issuance of Common Stock for Services

 

On December 27, 2013, the Company declared, but did not issue 76,142 shares of unregistered common stock to be paid to its directors for services during 2013, having a fair value of $150,000, based on the current stock price at the date declared.  These shares will be paid in 2014.

 

During 2012, the Company issued 100,000 shares to Herbert Denton for services provided related to the private issuance of stock in January and June of 2012.  The value of the shares issued to Mr. Denton was treated as a cost of issuance and was deducted from proceeds received.  We also issued 165,827 shares to Directors for services, with a total value at time of issuance of $451,232, which was expensed over three years.  The Company expensed $9,410, $211,818, and $230,004 for the years ended December 31, 2013, 2012 and 2011, respectively.

 

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 was classified with general and administrative expense in the consolidated statement of operations.  Shares were issued subsequent to December 31, 2011, and are therefore included as stock payable to directors as of that date.

 

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 Warrants     Exercise Prices  
Balance, December 31, 2010     725,000     $ .20 - $.75  
   Warrants exercised     (125,000 )   $ .30 - $.40  
Balance, December 31, 2011     600,000     $ .30 - $.60  
Warrants issued     1,734,667     $ 2.50 - $4.50  
   Warrants exercised     (250,000 )   $ .30 - $2.50  
   Warrants expired     (150,000 )   $ .30 - $.40  
Balance, December 31, 2012     1,934,667     $ .25 - $4.50  
Warrants issued     629,740     $ 1.20-$1.60  
   Warrants exercised     (25,000 )   $ 1.20  
   Warrants expired     (50,000 )   $ 4.50  
Balance, December 31, 2013     2,489,407     $ 0.60 - $4.50  
                 
The above common stock                
   warrants expire as follows:                
                 
Year ended December 31:                
2014             1,207,750  
2015             1,031,657  
Thereafter             250,000  
              2,489,407  

 

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. The Series B Preferred stock is no longer convertible to shares of the Company’s common stock.  At December 31, 2013 and 2012, cumulative dividends in arrears on the outstanding Series B shares were $135,000 and $127,500, respectively.

  

Series C

 

During 2000, the Board established a Series C preferred stock, consisting of 205,996 shares.  In 2002, 28,092 shares were converted to common stock and cancelled, leaving 177,904 Series C preferred shares authorized and outstanding.  The Series C preferred stock has preference over the Company’s common stock and has voting rights equal to that number of shares outstanding, but no conversion or 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, 2013 and 2012, cumulative dividends in arrears on the 1,751,005 outstanding Series D shares were $ 392,218 and $378,069, 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, 2013 and 2012, the liquidation preference for Series D preferred stock was $4,796,731 and $4,755,582, respectively.  Holders of the Series D preferred stock have the right, subject to the availability of authorized but unissued common stock, to convert their shares into shares of the Company's common stock on a one-to-one basis 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.