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8. SHAREHOLDERS' EQUITY (DEFICIENCY)
 6 Months Ended
Jun. 30, 2013
Notes to Financial Statements  
NOTE 8. SHAREHOLDERS' EQUITY (DEFICIENCY)

 

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 such 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 our 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 our 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, 2013 and December 31, 2012, there were 510,000 shares issued and outstanding, respectively. The Convertible Series A Preferred Stock is convertible at the rate of one share of common stock for one share of Convertible Series A Preferred Stock.

 

Common Stock

 

During the six months ended June 30, 2013, the Company issued 73,609 shares of common stock valued at $11,870 for services rendered and sold an aggregate of 2,552,104 shares of common stock for $666,100.

 

Stock Options

 

The Company issued 20,000 options valued at $3,000 to a director in January 2013. The options have an exercise price of $0.15 per share. The options expire in January 2023. The options were valued using the Black-Scholes model using the following assumptions: volatility: 343%; dividend yield: 0%; zero coupon rate: 0.25%; and a life of 10 years.  The following table summarizes stock options outstanding as of June 30, 2013:

 

    June 30, 2013  
    Number of Options     Weighted Average Exercise Price  
Outstanding, January 1, 2013     60,000     $ 1.42  
Granted     20,000       .15  
Outstanding, June 30, 2013     80,000     $ 1.10  

 

Options outstanding and exercisable by price range as of June 30, 2013 were as follows:

 

Outstanding Options    

Average

Weighted

     Exercisable Options  
Range     Number    

Remaining

Contractual

Life in Years

     Number    

Weighted

Average

Exercise Price

  
                                     
$ 0.05       20,000       7.52       20,000     $ 0.05  
$ 0.15       20,000       9.52       20,000     $ 0.15  
$ 2.10       40,000       6.52       40,000     $ 2.10  

 

Stock Warrants

 

The Company issued 250,000 warrants valued at $37,495 to a consultant in January 2013.  The options have an exercise price of $0.15 and expire in January 2018.  The warrants were valued using the Black-Scholes model with the following assumptions: volatility: 343%; dividend yield: 0%; zero coupon rate: 0.25%; and a life of 5 years.

 

During the quarter ended June 30, 2013, the Company issued 7,311,000 warrants in connection with convertible debt units and 974,800 warrants to the placement agent (see Note 6).  These warrants have an initial exercise price of $0.30 per share and expire July 31, 2018.

 

In June 2013 the Company issued 100,000 warrants with an exercise price of $.261 per share to a consultant for services.  The warrants were valued at $54,767 using the Black-Scholes model with the following assumptions: volatility, 245%; dividend yield, 0%; zero coupon rate, 0.25%; and a life of 5 years.

 

The following table summarizes the outstanding common stock warrants as of June 30, 2013:

 

    June 30, 2013  
          Weighted Average  
    Number of Warrants     Exercise Price  
Outstanding, January 1, 2013     10,050,000     $        0.12  
Granted     8,635,800       0.30  
Exercised     -       -  
Outstanding, June 30, 2013     18,685,800     $ 0.20  

 

Warrants outstanding and exercisable by price range as of June 30, 2013 were as follows:

 

Outstanding Warrants    

Average

Weighted

     Exercisable Warrants  
Range     Number    

Remaining

Contractual

Life in Years

     Number    

Weighted

Average

Exercise Price

  
$ 0.01       1,575,000       4.04       1,575,000     $ 0.01  
$ 0.05       975,000       4.12       975,000     $ 0.05  
$ 0.15       7,750,000       4.30       7,500,000     $ 0.15  
$ 0.261       100.000       4.99       100,000     $ 0.261  
$ 0.30       8,285,800       5.09       8,285,800     $ 0.30