Equity Transactions

12 Months Ended

Dec. 31, 2012

Equity [Abstract]

Equity Transactions

Note 11: Equity Transactions

Fiscal Year Ended December 31, 2012

Common Stock

During the fiscal year ending December 31, 2012, the holders of Convertible Debentures with a face value of $2,224,212 converted their debentures into 38,817,018 shares of common stock. In addition, associated with these debentures, the Company paid $222,474 in accrued interest by issuing 3,881,693 shares of common stock.

In December 2012, the Company issued 1,400,000 shares of restricted common stock to a vendor for services. The fair value of the shares was determined to be $70,000 based upon the market value of the stock on the date of issuance. The vendor services are expected to be performed over a twelve-month period over which the fair value of these shares will be amortized.

In October 2012, the Company issued 25,000 shares of restricted common stock to a vendor for services. The fair value of the shares was determined to be $3,000 based upon the market value of the stock on the date of issuance.

In July 2012, the Company issued 50,000 shares of restricted common stock to a vendor for services. The fair value of the shares was determined to be $8,500, based upon the market value of the stock on the date of issuance.

Warrants

During the fiscal year ended December 31, 2012, in conjunction with the sale of Convertible Debentures, the Company issued five-year common stock purchase warrants to acquire approximately 25,577,000 shares to holders of the Debentures and 7,673,000 similar warrants as compensation to Agents. Of these warrants, approximately 26,664,000 have an exercise price of $0.0745 per share and approximately 6,586,000 have an exercise price of $0.1287 per share.

In October 2012, a holder of a cashless warrant to purchase 86,340 shares of restricted common stock exercised the warrant in a cashless transaction and was issued 14,870 shares of restricted common stock.

Convertible Debentures

From January through March 2012, the Company entered into subscription agreements with accredited investors to purchase an aggregate principal amount of $2,350,527 of Convertible Debentures initially convertible into shares of common stock at a conversion price of $0.0573, together with five-year warrants to purchase approximately 20,511,000 common shares at an exercise price equal to $0.0745 per share.

From August through December 2012, the Company entered into subscription agreements with accredited investors to purchase an aggregate principal amount of $1,003,158 of Convertible Debentures initially convertible into shares of common stock at a conversion price of $0.099, together with five-year warrants to purchase approximately 5,066,000 common shares at an exercise price equal to $0.1287 per share.

Stock Options

In September 2012, the Company granted stock options to purchase 4,746,667 shares of common stock at an exercise price of $0.12 per share to six employees of the Company. The options vest 25% one year from grant and 1/48 of the remaining grant amount monthly for the remaining three years.

In February 2012, the Company granted a stock option to purchase 500,000 shares of common stock at an exercise price of $0.09 per share to our European Director of Business Development. The option vests 25% at grant and 1/36 of the remaining grant amount monthly for three years.

Fiscal Year Ended December 31, 2011

Common Stock

In January 2011, the Company issued 4,333 shares of Common Stock to a former holder of Series B Convertible Preferred Stock, pursuant to a dividend declaration on the Series B Convertible Preferred Stock. The fair value of the shares was determined to be approximately $1,733, based upon the value of the Common Stock on December 31, 2009, the date the dividends were determined.

In February 2011, the Company issued 42,222 shares of restricted Common Stock to Mark McWilliams, a director of the Company, in compensation for his service as interim Chief Executive Officer during October and November 2010. The Company recognized expense in the amount of $8,000, based upon the average market value of the stock during the October and November 2010 time period.

In February 2011, the Board approved the issuance of 348,392 shares of Common Stock for payment of accrued dividends related to the Company’s Series B Convertible Preferred Stock (the “Series B Preferred”). The Series B Preferred accumulated a dividend equal to $106,931 on December 31, 2010 and December 31, 2011. As per the terms of the Series B Preferred, the Company may pay the dividend either in cash or Common Stock as determined by the Board of Directors.

Series B Convertible Preferred Stock

There are authorized and outstanding 2,535,000 shares of Series B Convertible Preferred Stock (“Series B”). The Series B is convertible at $0.20 per common share and carries a liquidation preference of a like amount. At December 31, 2011, the Series B had accumulated and unpaid dividends of $106,931.

Series C Convertible Preferred Stock

There are authorized and outstanding 1,000,000 shares of Series C Convertible Preferred Stock (“Series C”). The Series C is convertible at $0.20 per common share and carries a liquidation preference of a like amount.

Warrants
 

On August 4, 2011, the Company entered into an Engagement Agreement (the “Agreement”) with Laidlaw & Company, LTD (“Laidlaw”). Under the Agreement, Laidlaw provided the Company financial advisory, strategic financial planning and fundraising services. The terms of the Agreement provide for the issuance of five-year warrants to Laidlaw to purchase 1,485,838 shares of Common Stock at an exercise price of $0.08 per share. The warrants were issued in December 2011. During the fiscal year ended December 31, 2011, the Company recognized noncash operating expense of approximately $78,000 related to this warrant issuance obligation.