NOTE 7 STOCK TRANSACTIONS AND SIGNIFICANT CONTRACTS

3 Months Ended

Mar. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 7     STOCK TRANSACTIONS AND SIGNIFICANT CONTRACTS

During January, February and March 2014, the Company sold an aggregate of 9,000,000 restricted shares of common stock to six accredited investors for cash proceeds totaling $450,000, or $0.05 per share.

During March 2014, the Company sold an aggregate of 7,050,000 restricted shares of common stock to 16 accredited investors for cash proceeds totaling $599,250, or $0.085 per share.

During January, February, and March 2013, the Company sold an aggregate of 12,233,332 restricted shares of common stock to 12 accredited investors for cash proceeds totaling $367,000, or $0.03 per share.

Stock Purchase Agreement

On November 17, 2010, the Company entered into a Common Stock Purchase Agreement (the “Stock Purchase Agreement”), with Mammoth Corporation (“Mammoth”), which provided for a financing arrangement that was 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% 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 Securities and Exchange Commission (“SEC”) first declared effective the registration statement filed in connection with the resale of shares issued under the Equity Line, 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 will pay to the Company a purchase price equal to 75% of the lowest closing bid price during the five-consecutive trading day period (the “Draw Down Pricing Period”) which preceded the date a draw down notice (the “Draw Down Notice”) was delivered to Mammoth (the “Draw Down Date”) in a manner provided by the Stock Purchase Agreement.  Subject to the limitations outlined below, the Company would, at its sole discretion, issue a Draw Down Notice to Mammoth, and Mammoth would then be irrevocably bound to purchase such shares.

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 was late, and $350 for each $5,000 of the Draw Down Amount for each trading day beyond 10 trading days that such delivery was 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 became effective by order of the SEC.  The Company made two Draw Down requests under the Stock Purchase Agreement in 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.