NOTE 6 - EQUITY TRANSACTIONS

12 Months Ended

Dec. 31, 2012

Stockholders' Equity Note Disclosure [Text Block]

NOTE 6 - EQUITY TRANSACTIONS

Unless otherwise stated, all transactions shown below were with unrelated parties and the securities issued were restricted.

Common Stock for Cash – 2011

During February 2011, the Company issued 582,065 shares of common stock to Mammoth, an accredited investor (as part of the Equity Line), for cash proceeds of $59,000 (net of $4,300 of stock issuance costs) at a price of $0.10875 per share.  There were no underwriters involved.  

The Company sold an aggregate of 1,000,000 restricted shares of common stock that were subscribed for as of March 31, 2011 and issued in April 2011.  The purchasers of these shares were two accredited investors, not otherwise affiliated with the Company.  The Company received cash proceeds of $120,000, or $0.12 per share.  There were no underwriters involved.  

During April and May 2011, the Company issued 3,649,867 shares of common stock to Mammoth (as part of the Equity Line) for cash proceeds of $658,012.  The sales were made pursuant to two separate “Draw Down Notices” issued by the Company under the Stock Purchase Agreement. The first notice was effective May 18, 2011, for 1,583,771 shares and proceeds of $261,322, or approximately $0.165 per share.  The second notice was effective June 16, 2011, for 2,066,096 shares and proceeds of $396,690, or approximately $0.192 per share.  There were no underwriters involved.

During April, May and June 2011, the Company sold an aggregate of 4,625,000 restricted shares of common stock to accredited investors, not otherwise affiliated with the Company, for cash proceeds of $370,000 at a price of $0.08 per share.  There were no underwriters involved.

The Company entered into a transaction, with an accredited investor, not otherwise affiliated with the Company, for 125,000 restricted shares of common stock that were subscribed for as of June 30, 2011 and issued in July 2011 for cash proceeds of $10,000 at a price of $0.08 per share.  There were no underwriters involved.

During September 2011, the Company issued 1,147,846 shares of common stock to Mammoth (as part of the Equity Line) for cash proceeds of $169,594, at a price of $0.14775 per share.  There were no underwriters involved.

During November and December 2011, the Company sold an aggregate of 1,550,000 restricted shares of common stock to eight accredited investors, not otherwise affiliated with the Company, for cash proceeds of $155,000 at a price of $0.10 per share.  There were no underwriters involved.

Common Stock for Cash – 2012

During January and February 2012, the Company sold an aggregate of 6,653,000 restricted shares of common stock to approximately 30 accredited investors for cash proceeds of $665,300 at a price of $0.10 per share. There were no underwriters involved.

During January 2012, the Company issued 903,089 shares of common stock to Mammoth (as part of the Equity Line) for cash proceeds of $149,010 at a price of $0.165 per share.  There were no underwriters involved.

During June 2012, the Company issued 500,000 shares of common stock to Mammoth (as part of the Equity Line) for cash proceeds of $65,625 at a price of $0.131 per share. There were no underwriters involved.

During June 2012, the Company sold an aggregate of 1,205,556 restricted shares of common stock to two accredited investors for cash proceeds of $108,500 at a price of $.09 per share. There were no underwriters involved.

During July 2012, the Company sold an aggregate of 250,000 restricted shares of common stock to an accredited investor for cash proceeds of $22,500 at a price of $0.09 per share. There were no underwriters involved.

During August 2012, the Company sold an aggregate of 2,500,000 restricted shares of common stock to three accredited investors for cash proceeds of $125,000 at a price of $0.05 per share. There were no underwriters involved.

During September 2012, the Company sold an aggregate of 2,483,333 restricted shares of common stock to seven accredited investors for cash proceeds of $149,000 at a price of $0.06 per share. There were no underwriters involved.

During October, November and December 2012, the Company sold an aggregate of 2,234,300 restricted shares of common stock to six accredited investors for cash proceeds of $135,858 at prices ranging from of $0.06 to $0.078 per share. There were no underwriters involved.

Recapitalization

The Company’s amended Articles of Incorporation (“AOI”) include a class of preferred stock, par value $0.00001, with authorized shares of 50,000,000.  To date, no shares of preferred stock have been issued.  The rights and preferences of the authorized preferred shares will be determined by the Company’s Board of Directors.  The amended AOI authorize 395,000,000 shares of common stock, par value $0.001.

Stock Purchase Agreement

On November 17, 2010, the Company entered into a Common Stock Purchase Agreement (the “Stock Purchase Agreement”), with Mammoth Corporation (“Mammoth”) providing for a financing arrangement that is sometimes referred to as a committed equity line financing facility (or “Equity Line”). The Stock Purchase Agreement provided that, upon the terms and subject to the conditions in the Stock Purchase Agreement, Mammoth was committed to purchase up to $10,000,000 of shares of common stock over the 24-month term of the Stock Purchase Agreement.  Furthermore, in no event could Mammoth purchase any shares of the Company’s common stock which, when aggregated with all other shares of common stock then beneficially owned by Mammoth, would result in the beneficial ownership by Mammoth of more than 4.9 percent of the then outstanding shares of the Company’s common stock. These maximum share and beneficial ownership limitations could not be waived by the parties.

Under the terms of the Stock Purchase Agreement, the Company had the opportunity for a 24-month period, commencing on the date on which the SEC first declares effective the registration statement, to require Mammoth to purchase up to $10,000,000 in shares of common stock. For each share of common stock purchased under the Stock Purchase Agreement, Mammoth would pay to the Company a purchase price equal to 75 percent of the lowest closing bid price during the five consecutive trading day period (the “Draw Down Pricing Period”) preceding the date a draw down notice (the “Draw Down Notice”) is delivered to Mammoth (the “Draw Down Date”) in a manner provided by the Stock Purchase Agreement.  Subject to the limitations outlined below, the Company could, at its sole discretion, issue a Draw Down Notice to Mammoth, and Mammoth would then be irrevocably bound to purchase such shares.

Each Draw Down Notice must specify the lowest purchase price during the Draw Down Pricing Period at which the Company would sell the shares to Mammoth, which could not be less than 75 percent of the lowest closing bid price during the Draw Down Pricing Period. Furthermore, the number of shares to be issued was limited by multiplying by five the average daily trading volume for the 30 trading days immediately preceding the delivery of the Draw Down Notice. The Draw Down Notice also included the aggregate dollar amount of the Draw Down, which could not be less than $25,000 and not more than $500,000 in any Draw Down Notice.  There must be a minimum of 15 trading days between each Draw Down Notice.  Regardless of the maximum amount indicated in the Draw Down Notice, Mammoth was not obligated to purchase shares under any Draw Down Notice in an amount which, when added to the number of shares of common stock then beneficially owned by Mammoth, would result in Mammoth owning more than 4.9 percent of the outstanding shares of the Company’s common stock.

The Company agreed to pay up to $5,000 of reasonable attorneys’ fees and expenses (of which the Company paid $4,300 during the year ended December 31, 2011 to fully satisfy this obligation) incurred by Mammoth in connection with the preparation, negotiation, execution and delivery of the Stock Purchase Agreement and related transaction documentation.

Further, if the Company issued a Draw Down Notice and failed to deliver the shares to Mammoth on the applicable settlement date, and such failure continued for 10 trading days, the Company agreed to pay Mammoth, in addition to all other remedies available to Mammoth under the Stock Purchase Agreement, an amount in cash equal to $100 for each $5,000 of the Draw Down Amount for the first 10 days such delivery is late, and $350 for each $5,000 of the Draw Down Amount for each trading day beyond 10 trading days that such delivery is late.

In connection with the Stock Purchase Agreement, the Company granted registration rights to Mammoth, and agreed to register the resale of shares issued to Mammoth in connection with Draw Downs made in connection with the Stock Purchase Agreement.  In January 2011, the Company filed a registration statement to cover the resale by Mammoth of up to 66,666,667 shares of common stock under the Stock Purchase Agreement.  The Company was not permitted to make Draw Downs under the Stock Purchase Agreement at any time there was not an effective registration statement registering the resale of shares of common stock by Mammoth.  On January 25, 2011, the registration statement was made effective by the SEC.  As previously mentioned, the Company made four Draw Down requests under the Stock Purchase Agreement during the year ended December 31, 2011 as well as two requests during the year ended December 31, 2012. The Stock Purchase Agreement terminated automatically by its terms on January 25, 2013, the 24-month anniversary of the effective date of the registration statement.

ADA Innovations

In December 2010, the Company reached a Services Agreement with ADA Innovations (“ADA”) for final development and production manufacturing of portable versions (the Projects) of the Company’s AsepticSure™ disinfection systems.  A contract containing the terms of the agreement and detailed development plan was executed by the parties in January 2011, and amended in January 2012.  Any and all notes, reports, information, inventions, sketches, plans concepts, data or other works created by ADA on its behalf under the Services Agreement will be the sole and exclusive property of the Company.

The term of the Services Agreement continued until the completion of the development and design projects contemplated by the Services Agreement.  Deliverables included: (1) the pre-production prototype designed and manufactured to the Company’s specifications, (2) design and device content compliant with all North America, Europe and United Kingdom regulatory and licensing agency regulations, (3) a soft launch program managed by ADA and the Company, intended to be followed by increased production, and (4) additional outsourced macro-manufacturing capacity as required, supervised by the parties.  The Company paid ADA as services were provided.  During the year ended December 31, 2012 and 2011, the Company incurred expenses totaling approximately $212,000 and $607,000, respectively, for services provided under the Services Agreement.  Of these amounts, approximately $204,000 and $569,000, respectively, were recorded as research and development expenses.