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SHAREHOLDERS' EQUITY
 6 Months Ended
Jun. 30, 2011
SHAREHOLDERS' EQUITY

NOTE 6: SHAREHOLDERS’ EQUITY

The Company’s Board of Directors may, without further action by the Company’s stockholders, from time to time, direct the issuance of any authorized but unissued or unreserved shares of preferred stock in series and at the time of issuance, determine the rights, preferences and limitations of each series. The holders of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of the Company before any payment is made to the holders of the common stock. Furthermore, the board of directors could issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of the common stock.

Convertible Series A Preferred Stock

The Company has authorized 1,000,000 shares of Convertible Series A Preferred Stock, $0.01 par value. At June 30, 2011 and December 31, 2010, there were 510,000 shares issued and outstanding. The Series A Convertible Preferred Stock is convertible at the rate of one common share for a preferred share.

 

Common Stock

The Company has authorized 75,000,000 shares of common stock, par value $0.01. At June 30, 2011 and December 31, 2010, there were 64,457,533 and 48,282,871 shares issued and outstanding, respectively.

In February 2011, the Company issued 572,115 common shares with a fair market value of $22,975 for payment of accrued legal fees in the amount of $14,875; the excess fair market value of the common shares of $8,100 was recorded as legal expenses.

In February 2011, the Company issued 14,076,923 shares of common stock with a fair market value of $563,077 to the CEO as consideration for payment of $366,000 accrued compensation; the excess fair market value of $197,077 has been recorded as share-based compensation during the three months ended March 31, 2011. Further, the CEO forgave accrued compensation due him amounting to $700,269. The compensation forgiven by the CEO has been treated as a capital contribution to the Company and therefore has been recorded as additional paid-in capital in February 2011.

In February 2011, the Company sold 750,000 shares of common stock for $63,750.

In February 2011, 20,000 stock options were exercised at a value of $0.05 per common stock.

In April 2011, the Company sold 750,000 common shares valued at $63,750.

Stock Options

The Company issued a total of 40,000 options valued at $2,000 to two directors in January 2011. The options have an exercise price of $0.05 and a fair market value of $0.05 per option. The options expire on January 2021. The options were valued using the Black-Scholes model using the following assumptions: volatility - 348%; dividend yield - 0%; zero coupon rate 3.50% and a life of 10 years. The following table summarizes stock option as of June 30, 2011:

 

     Number of
Option		     Weighted
Average
Exercise Price		      Contractual
Life  (Years)		      Weighted
Average
Fair Market
Value		  

Outstanding at December 31, 2010

      40,000      $ 2.10         9.00       $ 2.10   

Granted

      40,000        0.05         9.75         0.05   

Forfeited

      —          —           —           —     

Exercised

      (20,000 )      0.05         9.75         0.05   
  

 

 

    

 

 

     

 

 

     

 

 

  

Outstanding at March 31, 2011

      60,000      $ 1.42         9.08       $ 1.42   

Granted

      —          —           —           —     

Forfeited

      —          —           —           —     

Exercised

      —          —           —           —     
  

 

 

    

 

 

     

 

 

     

 

 

  

Outstanding at June 30, 2011

      60,000      $ 1.42         8.83       $ 1.42