Stockholders' Equity

12 Months Ended

Aug. 31, 2014

Equity [Abstract]

Stockholders' Equity

NOTE 11 — STOCKHOLDERS EQUITY

PREFERRED STOCK:

Series A Convertible Preferred Stock.

The Company is authorized to issue up to 10,000,000 shares of preferred stock, in one or more series, and to determine the price, rights, preferences and privileges of the shares of each such series without any further vote or action by the stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any shares of preferred stock that may be issued in the future.  

In January 2003, our Board of Directors authorized up to 4,500,000 shares of Series A Convertible Preferred Stock.  Each share of Series A Convertible Preferred stock has a par value of $0.001 and is convertible into one-half share of common stock in upon a cash payment by the holder to the Company of $0.40 per common share.  The Series A Convertible Preferred Stock is entitled to receive, in preference to the common stock, of noncumulative dividends, if declared by the Board of Directors, and a claim on the Company's assets upon any liquidation of the Company senior to the common stock.  These preferred shares are not entitled to voting rights. There are presently outstanding 129,062 shares of Series A Preferred Stock.

On March 30, 2003, the Company completed the private placement of Units pursuant to the terms of a Unit Purchase Agreement (the “Units”) with accredited investors. Each Unit consists of the following underlying securities: (i) three shares of the Company’s common stock; (ii) one share of Series A Convertible Preferred Stock, par value $.001 per share; and (iii) one three-year warrant to purchase one share of common stock at a per share price of $0.30. The warrants expired on March 31, 2006. Each share of Series A Convertible Preferred Stock is convertible into one half share of the Company’s common stock in exchange for $0.40 per common share ($.20 for each Series A Convertible Preferred share converted). The securities underlying the Units are not to be separately tradable or transferable apart from the Units until such time as determined by the Company’s Board of Directors. A total of 4,032,743 Units were issued. As of August 31, 2014 and August 31, 2013, there were 129,062 and 129,062 Units outstanding that had not been separated, respectively. These units are presented as their underlying securities on our balance sheet and consist of 64,531 shares of Series A Preferred Stock and 96,797 shares of common stock which is included in the issued and outstanding shares.

Below is a table detailing the outstanding Series A Convertible Preferred Stock shares outstanding during the last two fiscal years:

	Preferred	Number of				Weighted Avg.
	Shares	Common Shares		Proceeds if		Per Common Sh.
	Outstanding	Convertible		Converted		Exercise Price
Outstanding, August 31, 2012	129,062	64,531	$	25,812	$	0.40
Expired/Retired	—	—		—	$	—
Converted	—	—		—	$	0.40
Issued	—	—		—	$	—
Outstanding, August 31, 2013	129,062	64,531	$	25,812	$	0.40
Expired/Retired	—	—		—	$	0.40
Converted	—	—		—	$	—
Issued	—	—		—	$	—
Outstanding, August 31, 2014	129,062	64,531	$	25,812	$	0.40

Series D Convertible Preferred Stock

In March 2013, our Board of Directors authorized up to 60,000 shares of Series D Convertible Preferred Stock. Each share of Series D Convertible stock has a par value of $0.001 and is convertible into 1,000 shares of common stock beginning after March 1, 2014. Each share of Series D Convertible Preferred Stock has a stated liquidation value of $80.25. Each shares of Series D Convertible Preferred Stock shall have voting rights as stated below:

March 1, 2013 to February 28, 2014, 400 votes per share;

March 1, 2014 to February 28, 2015, 800 votes per share;

March 1, 2015 to February 28, 2016, 1,200 votes per share;

March 1, 2016 to February 28, 2017, 1,600 votes per share;

March 1, 2017 and after, 2,000 votes per share;

On March 22, 2013, the Company issued 58,564 shares of Series D Convertible Preferred Stock to acquire 100% of the outstanding common stock of Dotolo. On March 22, 2013 the issued shares had a fair market value of $585,640 based on the fair market value of the underlying common stock shares.

On January 3, 2014, as payment for $150,000 of banking fees associated with our $4 million line of credit, we issued 20,000 shares of Series D Convertible Preferred Stock.

 Below is a table detailing the outstanding Series D Convertible Preferred Stock shares outstanding during the last two fiscal years:

		Preferred		Number of				Weighted Avg.
		Shares		Common Shares		Proceeds if		Per Common Sh.
		Outstanding		Convertible		Converted		Exercise Price
Outstanding, August 31, 2012			—		—	$	—	$	—
Expired/Retired			—		—		—	$	—
Converted			—		—		—	$	—
Issued			58,564		58,564,000		—	$	80.25
Outstanding, August 31, 2013			58,564		58,564,000	$	—	$	—
Expired/Retired			—		—		—	$	—
Converted			—		—		—	$	—
Issued			20,000		20,000,000		—	$	80.25
	Outstanding, August 31, 2014		78,564		78,564,000	$	—	$	80.25

SUBSCRIBED COMMON STOCK:

Below is a table detailing the Common Stock Subscribed during the last two fiscal years:

For the period Ended August 31, 2014
	Shares		Amount
Shares issuable upon conversion of convertible notes payable		1,058,201	$	5,000
Total subscribed stock		1,058,201	$	5,000
For the year Ended August 31, 2013
		Shares		Amount
Shares issuable upon conversion of convertible notes payable		—	$	—
Total subscribed stock		—	$	—

COMMON STOCK:

On March 7, 2014, the Company increased its authorized shares of common stock to 750,000,000. The increase was approved by a majority of the Company’s shareholders on January 27, 2014.

Below are recent sales of unregistered securities:

Date	Securities		Underwriters/
Sold	Sold	Consideration	Purchasers *	Notes
10/15/2012	1,000,000	$             20,000	Accredited Investor	The Company sold 1,000,000 shares of common stock to a non-related accredited investor at $0.02 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
1/6/2013	2,000,000	$             20,000	Accredited Investor	The Company sold 2,000,000 shares of common stock to a non-related accredited investor at $0.01 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
2/8/2013	1,024,164	$                     -	Anthony Silverman, former CEO	Anthony Silverman, our former President and CEO, converted a promissory note in the amount of $10,242 in principal and interest into 1,024,164 shares of common stock at $0.01 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
6/17/2013	2,000,000	$             10,000	Accredited Investor	The Company sold 2,000,000 shares of common stock to a non-related accredited investor at $0.005 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
7/17/2013	4,000,000	$             20,000	Accredited Investor	The Company sold 4,000,000 shares of common stock to a non-related accredited investor at $0.005 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
8/8/2013	6,000,000	$             36,000	Accredited Investor	The Company sold 6,000,000 shares of common stock to a non-related accredited investor at $0.006 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
9/12/2013	1,000,000	$                     -	Vendor	The Company issued 1,000,000 S-8 shares to a vendor for consulting work.  The Company recorded an expense of $11,500 upon the issuance of those shares.
9/12/2013	1,500,000	$             10,000	Accredited Investor	The Company sold 1,500,000 shares of common stock to an affiliated accredited investor at $0.00667 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
10/3/2013	4,000,000	$                     -	Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $15,620 in principal and interest into 4,000,000 shares of common stock at $0.00391 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
12/3/2013	1,891,123	$                     -	Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $9,380 in principal and interest into 1,891,123 shares of common stock at $0.00496 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/3/2014	2,000,000	$                     -	Vendor	The company issued 2,000,000 shares of common stock as consideration for services.  The company recorded an expense of $22,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/13/2014	3,076,923	$                     -	Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $20,000 in principal and interest into 3,076,923 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/14/2014	1,000,000	$                     -	Vendor	The company issued 1,000,000 shares of common stock as consideration for services.  The company recorded an expense of $19,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/15/2014	117,436	$                     -	Accredited Investor	Additional reset shares were issued to a non-affiliated accredited investor in connection with the prior conversion of $9,380 in principal and interest into 117,436 shares of common stock.  These shares were exempt from registration under Section 4(2) of the Securities Act.

1/21/2014	3,500,000	$                     -	Accredited Investor	The company issued 3,500,000 shares of common stock as consideration for  fees.  The company recorded an expense of $45,500 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/21/2014	1,500,000	$                     -	Accredited Investor	The company issued 1,500,000 shares of common stock as consideration for  fees.  The company recorded an expense of $30,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/31/2014	3,472,222	$                     -	Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $25,000 in principal and interest into 3,472,222 shares of common stock at $0.0072 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
2/7/2014	1,000,000	$                     -	Accredited Investor	The company issued 1,000,000 shares of common stock as consideration for  fees.  The company recorded an expense of $9,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
2/24/2014	4,615,385	$                     -	Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $30,000 in principal and interest into 4,615,385 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
3/12/2014	4,615,385	$                     -	Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $30,000 in principal and interest into 4,615,385 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
4/7/2014	2,936,314	$                     -	Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $19,086 in principal and interest into 2,936,314 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
4/7/2014	5,383,007	$                     -	Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $17,764 in principal and interest into 5,383,007 shares of common stock at $0.0033 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
6/2/2014	5,000,000	$                     -	Accredited Investor	The company issued 5,000,000 shares of common stock as consideration for services.  The company recorded an expense of $30,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
6/25/2014	5,138,746	$                     -	Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $25,000 in principal and interest into 5,138,746 shares of common stock at $0.004865 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
7/14/2014	2,500,000		Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $11,000 in principal and interest into 2,500,000 shares of common stock at $0.0044 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
7/24/2014	1,149,425		Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $5,000 in principal and interest into 1,149,425 shares of common stock at $0.00435 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
8/1/2014	3,416,764		Accredited Investor	A non-affiliated accredited investor converted a promissory note in the amount of $8,456 in principal and interest into 3,416,764 shares of common stock at $0.002475 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
8/26/2014	1,200,000	$                     -	Accredited Investor	The Company sold 1,200,000 shares of common stock to an affiliated accredited investor at $0.00833 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
	76,036,894	$           116,000
*  There were no underwriters associated with any of our Sales of Unregistered Securities.

NON-CONTROLLING INTEREST

On February 27, 2009, in connection with the Technology Agreement we entered into with Institut für Umwelttechnologien GmbH, a German Company (“IUT”) whereunder the parties have agreed that the Company’s marketing rights have been transferred to its subsidiary, Oncologix Corporation and have issued IUTM 10% of the equity ownership of that subsidiary. As of February 27, 2009, the value of the non-controlling interest was $212. It was determined at August 31, 2010 the value of the investment in IUTM was impaired. Accordingly, we recorded an impairment loss in the amount of $3,186 for the year ended August 31, 2010. As of August 31, 2014, as a result of the disposition of Oncologix Corporation, we do not have to recognize a non-controlling interest.

WARRANTS:

The following table summarizes warrant activity in fiscal 2014 and 2013:

		Weighted Avg.
	Number	Exercise Price
Outstanding, August 31, 2012	-	-
Expired/Retired	-	-
Exercised	-	-
Issued	7,000,000	0.012
Outstanding, August 31, 2013	7,000,000	-
Expired/Retired	-	-
Exercised	-	-
Issued	23,583,333	0.011
Outstanding, August 31, 2014	30,583,333	0.011

The fair value of warrants granted is estimated using the Black-Scholes option pricing model. This model utilizes the following factors to calculate the fair value of options granted: (i) annual dividend yield, (ii) weighted-average expected life, (iii) risk-free interest rate and (iv) expected volatility. The warrants were expensed and accounted for under ASC 718.

The fair value for these warrants was estimated as of the date of grant using a Black-Scholes option-pricing model with the following assumptions:

	For the Year Ended August 31,
	2014	2013
Volatility	104% - 444%	97.2% to 97.9%
Risk free rate	0.25%	0.38%
Expected dividends	None	None
Expected term (in years)	2 to 5 years	3 to 4 years

Details relative to the 30,583,333 immediately exercisable outstanding warrants at August 31, 2014 are as follows:

		Weighted
		Average
Date of	Number	Exercise	Remaining	Expiration
Grant	of Shares	Price	Exercise Life	Date
Fourth quarter of fiscal 2013	7,000,000	$     0.012	3 to 4 years	July 2017
Outstanding, August 31, 2013	7,000,000
First quarter of fiscal 2014	4,500,000	$     0.012	3 years	November 2017
Second quarter of fiscal 2014	5,500,000	$     0.017	2 to 3 years	Dec 2015 to Dec 2016
Third quarter of fiscal 2014	9,583,333	$     0.012	5 years	May 2019
Fourth quarter of fiscal 2014	4,000,000	$     0.007	2 years	August 2016
Outstanding, August 31, 2014	30,583,333

On August 1, 2013, the company issued 1,000,000 four-year cashless warrants as additional consideration for the acquisition of Amian Angels. These warrants expire four years after the date of issuance and have an exercise price of $.015.

On August 5, 2013, the company issued 6,000,000 three-year cashless warrants, to a related party, as finder’s fees related to a working capital investment. These warrants expire three years after the date of issuance and have an exercise price of $.012.

On September 11, 2013, the company issued 1,500,000 three-year cashless warrants, to a related party, as finder’s fees related to a working capital investment. These warrants expire three years after the date of issuance and have an exercise price of $.015.

On November 8, 2013, the company issued 3,000,000 three-year cashless warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire three years after the date of issuance and have an exercise price of $.01.

On December 3, 2014, the company issued 1,000,000 three-year cashless warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire three years after the date of issuance and have an exercise price of $.025.

On December 20, 2014, the company issued 3,000,000 two-year cashless warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire two years after the date of issuance and have an exercise price of $.016.

On February 7, 2014, the company issued 1,000,000 two-year cashless warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire two years after the date of issuance and have an exercise price of $.015.

On May 21, 2014, the company issued 9,583,333 five-year cashless warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire five years after the date of issuance and have an exercise price of $.009.

On August 15, 2014, the company issued 4,000,000 two-year warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire two years after the date of issuance and have an exercise price of $.0065.

The remaining contractual life of warrants outstanding as of August 31, 2014 was 2.80 years. Warrants for the purchase of 30,583,333 and nil shares were immediately exercisable on August 31, 2014 and 2013, respectively with a weighted-average price of $0.011 and $0.012 per share, respectively.

STOCK OPTIONS:

ASC 718 requires the estimation of forfeitures when recognizing compensation expense and that this estimate of forfeitures be adjusted over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment, which is recognized in the period of change and which impacts the amount of unamortized compensation expense to be recognized in future periods.

ASC 718 requires that modification of the terms or conditions of an equity award is to be treated as an exchange of the original award for a new award. This event is accounted for as if the entity repurchases the original instrument by issuing a new instrument of equal or greater value, incurring additional compensation cost for any incremental value.

2000 Stock Incentive Plan

The Company is authorized to issue up to 7,500,000 shares of common stock under its 2000 Stock Incentive Plan. Shares may be issued as incentive stock options, non-statutory stock options, deferred shares or restricted shares. Options are granted at the fair market value of the common stock on the date of the grant and have terms of up to ten years. The 2000 Stock Incentive Plan also provides for an annual grant of options to members of our Board of Directors. For fiscal years ended August 31, 2008 through 2012, our Board of Directors elected to waive the grant of these annual options.

On December 13, 2013, the Board of directors authorized the granting of 6,100,000 options to its three officers; 2,400,000 options to Wayne Erwin, our CEO; 2,100,000 options to Michael Kramarz, our CFO; and 1,600,000 options to Vickie Hart, President of Amian Angels. These options vest immediately and have an exercise price $.015, the closing stock price on December 13, 2013.

On December 20, 2014, the Company issued 20,000 options as part of its annual grant program to its two directors. These options vest in 1 year and have an exercise price of $.016, the closing stock price on December 20, 2013.

We have 485,253 shares of common stock available for future issuance under our 2000 Stock Incentive Plan as of August 31, 2014. This plan has been approved by our shareholders.

During the years ended August 31, 2014 and 2013, we granted 6,120,000 and nil options from the stock incentive plan described above, respectively. During the years ended August 31, 2014 and 2013, nil and nil options were exercised, respectively. During the years ended August 31, 2014 and 2013, 163,335 and 80,000 options expired, respectively. During the years ended August 31, 2014 and 2013, $91,163 and $0 was expensed as stock based compensation, respectively.

					Weighted Average
	Number of		Option Price		Exercise Price
	Options Granted		Per Share		Per Share
Outstanding, August 31, 2012	297,085		$0.12 - $5.16	$	1.430
Granted	—		—	$	—
Exercised	—		—	$	—
Cancelled	(80,000	)	$1.60 - $5.16	$	2.420
Outstanding, August 31, 2013	217,085		$0.12 - $2.00	$	1.120
Granted	6,120,000		$0.015 - $0.016	$	0.020
Exercised	—		—	$	—
Cancelled	(163,335	)	$1.04 - $2.00	$	1.380
Outstanding, August 31, 2014	6,173,750		$0.12 - $2.00	$	0.016

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of the third quarter of fiscal 2014 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on August 31, 2014.

Expected volatility is based primarily on historical volatility. Historical volatility is computed using weekly average pricing observations for an applicable historic period. We believe this method produces an estimate that is representative of our expectations of the future volatility over the expected term of our options. We currently have no reason to believe future volatility over the expected life of these options is likely to differ materially from historical volatility. The weighted-average expected life is based upon share option exercises, pre and post vesting terminations and share option term expirations. The risk-free interest rate is based on the U.S. treasury security rate estimated for the expected life of the options at the date of grant.

	Options			Options
	Outstanding			Exercisable
Number of options		6,173,750		6,173,750
Aggregate intrinsic value of options	$	—	$	—
Weighted average remaining contractual term (years)		9.23		9.23
Weighted average exercise price	$	0.016	$	0.016

2013 Omnibus Incentive Plan

The Company is authorized to issue up to 10,000,000 shares of common stock under its 2013 Omnibus Incentive Plan to employees, officers, directors and consultants. The issuance adoption of this plan has been approved by the Company’s Board of Directors on May 20, 2013 and was approved by our shareholders on January 27, 2014. Any options are granted at the fair market value of the common stock on the date of the grant and have terms of up to ten years. Under the 2013 Omnibus Incentive Plan the price of the granted common stock options are equal to the fair market value of such shares on the date of grant.

On September 11, 2013, we issued 1,000,000 S-8 shares to a consultant in payment for investor relations work for the Company. On January 3, 2014, we issued 1,000,000 S-8 shares to a consultant in payment for services to be provided for the Company. We have 8,000,000 shares of common stock available for future issuance under our 2013 Omnibus Incentive Plan as of August 31, 2014.