XML 31 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
Preferred stock and common stock
 12 Months Ended
Dec. 31, 2011
Notes to Financial Statements  
Note 7. Preferred stock and common stock

Note 7: Preferred stock and common stock

 

On October 31, 2011, the Company effected a one-for-ten reverse stock split to shareholders of record as of October 31, 2011.  All share and per share information has been retroactively adjusted to reflect the stock split. The number of shares of the Company's common stock and its par value remain unchanged. Outstanding stock incentive awards are adjusted to give effect to the reverse split and the shares available for future grants will be proportionately reduced.

 

As of December 31, 2009, there were five shares of Series A Convertible Preferred Stock outstanding, each of which are convertible into 833 shares of our common stock. On March 31, 2010, we issued 26 shares of Series A Preferred Stock to our Chief Executive Officer for the conversion of a note payable in the amount of $23,525 and accrued interest of $4,255.  The fair value of the preferred stock on the date of the transaction was $39,000, which was determined based upon the number of common shares issuable upon conversion of the preferred shares into common stock, 21,666, and the market price of our common stock on the date of the agreement of $1.80.  The difference between the carrying value of the debt and accrued interest and the fair value of the preferred shares of $11,220 has been recorded as additional interest expense.  In April 2009, we issued 2,000 common shares to the holder of two preferred shares, for a value of $100 per preferred share, in settlement of the stated value and any potential claims to accumulated dividends thereon.  Although the Certificate of Designation of the rights, preferences and limitations of the Preferred Stock provides for dividends equal to eleven percent (11.0%) per year on the liquidation preference of $25,000 per share, we have not declared or accrued such dividends.  Additionally, under Delaware law, dividends are an obligation only when declared, and the Board has not declared any dividends payable on the Series A Preferred Stock.  In November 2010, the Company’s Chief Executive Officer who held 83.9% of the outstanding shares of Series A Preferred Stock approved an amendment to the Certificate of Designation whereby the holders of at least 56 2/3rds of the outstanding shares of Series A Preferred Stock may elect to require the Company to redeem all of the outstanding shares of Series A Preferred Stock for $1,000 per share.  In November 2010, the Company’s Chief Executive Officer who held 83.9%  of the outstanding shares of Series A Preferred Stock elected to require the Company to redeem the remaining 31 shares of Series A Preferred Stock in exchange for proceeds of $31,000, and therefore there were no shares of Series A Preferred Stock outstanding at December 31, 2011 and 2010.

 

The Certificate of Designation of the rights, preferences and limitations of the Company’s Series B Non-Convertible, Cumulative, Non-Voting, Redeemable Preferred Stock provides that the Company may issue up to 476,200 shares of Series B Non-Convertible, Cumulative, Non-Voting, Redeemable Preferred Stock, par value $1.00 per share, which shall earn dividends at the rate of fifteen percent (15.0%) per year. Declaration and payment of dividends are at the sole discretion of the Company’s Board of Directors, and are not mandatory. The Certificate of Designation of the rights, preferences and limitations of the Company’s Series B Non-Convertible, Cumulative, Non-Voting, Redeemable Preferred Stock also provides that the Company may not pay dividends on its common stock until all accrued but unpaid dividends on such preferred stock have been paid. At December 31, 2011 and 2010, there were no issued and outstanding shares of such preferred stock.

 

The Company has never declared or paid any cash dividends on its common stock.

 

In November 2010, the Company’s Board of Directors authorized a stock repurchase plan (the “Repurchase Plan”), whereby the Company was authorized to repurchase up to 100,000 shares of the Company’s common stock over a twelve month period, but not to exceed an aggregate purchase price of $10,000 in cash every fiscal quarter for a maximum of four quarters or until the board causes action to modify or terminate the Repurchase Plan.  Anything beyond these amounts would require additional consent from the Board of Directors.  During the term of the Repurchase Plan, the Company repurchased 21,287 shares of common stock.

  

During years ended December 31, 2011 and 2010, changes in the shares of our common stock outstanding are as follows:

 

   Year ended
 December 31,
2011		  Year ended
December 31,
2010
Balance at beginning of year   1,768,531    1,682,634 
Repurchase and retirement of shares (1)   (16,356)   (5,000)
Issuance of common stock for services  (2)   —      45,000 
Conversion of notes payable for common stock (3)   —      45,897 
Balance at end of year   1,752,175    1,768,531 

 

1.   Repurchase and retirement of treasury shares:

 

Year ended December 31, 2010

 

·   In December 2010, the Company purchased 5,000 shares from a shareholder in a private transaction for $8,500.

 

Year ended December 31, 2011

 

·   During the year ended December 2011, the Company purchased a total of 16,356 shares from shareholders in both private transactions and in the open market for proceeds of $36,545.

 

2.   Shares issued for services for services:

 

Year ended December 31, 2010

 

·   Between March 2010 and November 2010, we issued a total of 45,000 shares of our common stock to our Chief Financial Officer with an estimated total fair market value of $84,000 based on the closing price of our stock on each date of issuance.

 

3.   Conversion of notes payable for common stock.

 

Year ending December 31, 2010

 

·   On March 31, 2010, we issued 45,897 shares of common stock to two prior Directors of the Company for the conversion of notes payable totaling $50,000 and accrued interest of $9,666.  The notes payable and accrued interest were converted at $1.30 per share, which represents the average share price over the prior twelve months.  The fair value of common stock on the date of the transaction was $1.80.  The difference of $0.50 per share, or $22,958, has been recorded as additional interest expense.

 

On July 7, 2008, we amended our Articles of Incorporation accordingly, and as of that date, we have 100,000,000 authorized shares of common stock, par value $0.001. Additionally, we have 30,000,000 authorized shares of preferred stock, of which 60 shares are designated as Series A preferred stock, par value $1.00 and 476,200 shares are designated as Series B preferred shares, par value $1.00.