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Note 7 - Stockholders' Equity
 6 Months Ended
Jun. 30, 2012
Stockholders' Equity Note Disclosure [Text Block]

Note 7 – Stockholders’ Equity


Warrants


In 2008, the Company issued warrants to purchase 250,000 and 50,000 unregistered shares of the Company’s common stock at exercise prices of $1.50 and $2.30 per share, respectively. The warrants expired on various dates through November 2011. At June 30, 2012, 218,500 of these warrants had expired and 81,500 were exercised.


During March through December 2010, the Company issued warrants to purchase 439,999 unregistered shares of the Company’s common stock at an exercise price of $0.75 per share in association with stock subscription agreements. These warrants expire on various dates through December 2013. As of June 30, 2012, all of these warrants were outstanding.


During January through December 2011, the Company issued warrants to purchase 2,000,000 unregistered shares of the Company’s common stock at an exercise price of $0.75 per share in association with stock subscription agreements. These warrants expire on various dates through June 2014. As of June 30, 2012, all of these warrants were outstanding.


The Company issued warrants on June 3, 2011 to various persons, including affiliates of the Company, for services provided to the Company. These warrants covered the purchase of 1,855,000 unregistered shares of the Company’s stock at an exercise price of $1.05 per share with a five-year term. These share-based payments have been accounted for in accordance with ASC 815-40 using the Black Scholes warrant pricing model to determine the fair value of each warrant. As of June 30, 2012, all of these warrants were outstanding.


On February 3, 2012, The Company issued warrants to purchase 500,000 unregistered shares of the Company’s common stock at an exercise price of $3.00 per share with a five-year term for settlement of certain disputed amounts (See Note 9). These share-based payments have been accounted for in accordance with ASC 815-40 using the Black-Scholes warrant pricing model to determine the fair value of each warrant. As of June 30, 2012, all of these warrants were outstanding.


In connection with the acquisition of Cornerstone (See Note 5), on March 30, 2012, the Company issued warrants to purchase 300,000 unregistered shares of common stock at exercise prices ranging from $2.00 to $4.00 per share. These warrants expire at various dates through December 2017. As of June 30, 2012, all of these warrants were outstanding.


During the second quarter of 2012, the Company issued warrants to purchase 335,000 unregistered shares of the Company’s common stock at an exercise price of $3.00 per share in association with stock subscription agreements. These warrants expire on various dates through June 2015. As of June 30, 2012, all of these warrants were outstanding.


Expenses related to warrants issued in conjunction with settlement of certain disputes for the six months ended June 30, 2012 and 2011 were $262,700 and $0, respectively.


A summary of warrants issued, exercised and expired during the six months ended June 30, 2012 is as follows:


          Weighted  
          Average  
    Shares     Exercise Price  
Balance at December 31, 2011     4,294,999       0.88  
Issued     1,135,000       2.12  
Balance at June 30, 2012     5,429,999       1.14  
               

The weighted average grant date fair value of warrants issued during the six month period ended June 30, 2012 amounted to $0.52 to $0.77 per warrant. The fair value of each warrant granted as compensation for services was determined using the Black-Scholes warrant pricing model and the following assumptions:


    June 30, 2012  
Risk Free interest rate     .33% to 1.04%  
Expected term     5.0 years  
Annualized volatility     79%-to 81%  
Expected dividends     —  

The expected term of warrants granted is based on the contractual terms of the agreement and represents the period of time that warrants granted are expected to be outstanding.


The warrant shares referred to above are unregistered shares of the Company’s stock and are restricted from trading as defined under Rule 144 of the United States Securities Act of 1933.


Private Placement of Common Stock


In February 2012, the Company raised gross proceeds of $500,000 through the private placement of 500,000 shares of its common stock to accredited investors at $1.00 per share. The private placement was undertaken pursuant to the Agreement between the Company and Newton as disclosed in Note 9, below.


In the second quarter of 2012, the Company raised gross proceeds of $335,000 through the private placement of 335,000 unregistered shares of common stock to accredited investors at $1.00 per share. Each investor received a three-year warrant to purchase shares of common stock at $3.00 per share for a number of shares equal to the number of shares purchased by the investor in this offering. The Company paid a 10% commission on the gross proceeds of this offering to its placement agent.


Treasury Shares


On April 7, 2011, 4,500,000 shares of the Company’s stock were surrendered to Treasury in exchange for a $200,000 interest-free note payable due in April 2013. The note payable is reported as note payable to related party on the accompanying consolidated balance sheets. In accordance with GAAP, the Company has discounted this obligation at an imputed rate of 8%. The balance at June 30, 2012 was $188,349.


In April 2012, the Company purchased 100,000 shares of common stock from an affiliate at a price of $.25 per share. Of the $25,000 purchase price, $14,000 was paid in 2011 and the balance in April 2012. The shares have been held as treasury stock from the date of closing.


In May 2012, the Company purchased 450,000 shares of its common stock from an affiliate at a price of $0.20 per share. Of the $90,000 purchase price, $10,000 was paid at closing and the balance is payable $10,000 per month through January 2013. The payable has a balance of $70,000 at June 30, 2012 and is included in “Payable to related parties” in the accompanying condensed consolidated balance sheets. The shares have been held as treasury stock from the date of closing.


Preferred Shares


The Company has 50,000,000 shares of authorized, $0.0001 par value preferred stock. At June 30, 2012, no shares had been issued.