STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2011

STOCKHOLDERS? EQUITY

STOCKHOLDERS? EQUITY

NOTE 7 - STOCKHOLDERS' EQUITY

Preferred Stock

As of May 2008, all shares of Series A Preferred Stock of the Company were converted into common stock. There are currently 5,000,000 shares of Preferred Stock authorized, with no shares of Series A Preferred Stock currently issued or outstanding.

Effective June 24, 2010, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series B Convertible Redeemable Preferred Stock (the "Certificate") with the Texas Secretary of State, designating 75,000 shares of Series B Preferred Stock, par value $10.00 per share (the "Series B Preferred Stock"). The Series B Preferred Stock ranks senior to shares of all other common and preferred stock with respect to dividends, distributions, and payments upon dissolution.  Each of the Series B Shares is convertible at the option of the holder into shares of common stock as provided in the Certificate.  There are currently no shares of Series B Preferred Stock issued or outstanding.

Common Stock

The Company is authorized to issue 100,000,000 shares of common stock, par value of $0.001 per share.  These shares have full voting rights.  As of September 30, 2011, there were 58,031,375 shares of common stock issued and 58,027,286 shares outstanding.   At December 31, 2010, there were 41,316,930 shares of common stock issued and 41,312,841 shares outstanding.  The Company holds 4,089 shares as treasury stock.

During the three months ended March 31, 2011, the Company entered into various Subscription Agreements with unrelated parties (the "Investors") to purchase 3,473,300 Units at a purchase price of $.25 per Unit ("Units"), with each Unit consisting of:   (i) one share of the Company's common stock and (ii) a warrant to purchase one share of the Company's common stock (the "Warrants").   One-half of the Warrants have an exercise price of $1.00 per share of common stock and one-half of the Warrants have an exercise price of $.50 per share of common stock.  The Warrants may be exercised at any time over a three-year period.  The total amount paid for the Units was $868,700, of which $434,350 was recorded for the sale of stock and $434,350 was recorded for the sale of warrants.

In addition, during the three months ended March 31, 2011, the Company issued 4,169,213 shares of common stock in payment of related party debt in the amount of $778,108 and 5,400,000 shares of common stock in payment of unrelated party debt in the amount of $322,000.  The Company also issued 164,286 shares of common stock as payment for cable television spots and 200,000 shares in payment of consulting and services.    Debt related costs in the amount of $405,580 were paid with the issuance of 733,043 shares of common stock.

During the three months ending June 30, 2011, the Company entered into various Subscription Agreements to various unrelated parties and issued 244,000 shares of common stock and 260,000 warrants, half with an exercise price of $1.00 and half with an exercise price of $0.50 in consideration for payments of $76,000 in the aggregate. The Company also issued 80,000 shares for consulting services with a value of $49,600 and 400,000 shares of stock in payment of placement fees with a value of $268,000. The Company issued an additional 300,000 shares in payment of related party debt and 80,000 shares in payment of unrelated party debt.  The Company also issued 350,000 shares for loan origination fees.

During the three months ended September 30, 2011, the Company converted $52,000 of debt and accrued interest into 235,603 shares of common stock. The Company also issued 845,000 shares of common stock for loan origination fees valued at $567,700.  Additionally, the Company entered into various Subscription agreements with unrelated parties and issued 40,000 shares of common stock in consideration for payments of $10,000.

2011 Omnibus Long-Term Incentive Plan

On March 9, 2011, the Company adopted, subject to shareholder approval, the 2011 Omnibus Long-Term Incentive Plan (the "Plan") to offer competitive long-term incentive compensation opportunities as well as to align the interests of the participants with those of the Company's shareholders.  Under the Plan, stock options, stock appreciation rights, restricted shares, and performance shares are to be awarded at the discretion of the Compensation Committee to selected officers, employees, consultants and eligible directors of the Company.   In order for the Plan to become effective, shareholder approval must be obtained on or before March 8, 2012.

Warrants

A summary of the status of the warrants granted for the nine month period ended September 30, 2011 and for the year ended December 31, 2010 and changes during the periods then ended is presented below:

For the Year Ended December 31, 2010					For the Nine Months Ended September 30, 2011
	Shares		Weighted Average Exercise Price			Shares		Weighted Average Exercise Price
Outstanding at beginning of period		1,299,769	$	1.54	Outstanding at beginning of period		3,230,369	$	1.07
Granted		1,930,600		0.75	Granted		5,708,299		0.68
Exercised		-		-	Exercised		-		-
Forfeited		-		-	Forfeited		-		-
Expired		-		-	Expired		-		-
Outstanding at end of period		3,230,369	$	1.07	Outstanding at end of period		8,938,668	$	0.82

As of September 30, 2011								As of September 30, 2011
Warrants Outstanding								Warrants Exercisable
				Weighted-
				Average		Weighted-				Weighted-
Range of		Number		Remaining		Average		Number		Average
Exercise Prices		Outstanding		Contract Life		Exercise Price		Exercisable		Exercise Price
$	0.001		299,769		1.3	$	0.001		299,769	$	0.001
	0.25		200,000		4.1		0.25		200,000		0.25
	0.40		999,999		2.8		0.40		999,999		0.40
	0.50		2,694,450		2.7		0.50		2,694,450		0.50
	0.60		475,000		4.8		0.60		475,000		0.60
	0.75		200,000		4.1		0.75		200,000		0.75
	1.00		3,069,450		2.6		1.00		3,069,450		1.00
	2.00		1,000,000		1.3		2.00		1,000,000		2.00
$	0.001- 2.00		8,938,668		2.7	$	0.82		8,938,668	$	0.82