Stockholders' Deficit

12 Months Ended

Oct. 31, 2012

Stockholders' Equity Note [Abstract]

Stockholders' Deficit

8. Stockholders’ Deficit

Common Stock

Between November 1, 2011 and July 31, 2012, the Company issued a total of 250,000 shares of common stock to the Chief Executive Officer, Michael Brennan, pursuant to his compensation arrangement. The shares were issued at prices ranging from $0.0035 to $0.0065 per share, for an aggregate compensation expense of $1,279.

Between November 10, 2011 and October 31, 2012, the Company issued a total of 374,321,307 shares of common stock upon the conversion of $710,500 in principal and $127,982 in penalties and interest on notes and convertible notes at prices ranging from $0.0011 to $0.0035 per share.

The Company sold 30,830,204 shares of common stock under the terms of a Securities Purchase Agreement to Dutchess Opportunity Fund during fiscal 2012 for proceeds of $99,739, net of $22,414 in transfer fees, at prices ranging from $0.003 to $0.0056 per share.

The Company sold an additional 71,619,193 shares of common stock in private placement transactions with an unaffiliated stockholder for proceeds of $151,661 at prices ranging from $0.015 to $0.003 per share. The Company issued the purchaser a three-year option to purchase 40 million shares of common stock at graduated exercise prices. In January 2013, the purchaser exercised 20 million of these options. See also Item 13 – “Subsequent Events.”

During fiscal 2012, the Company issued 22,021,429 shares of common stock in payment for legal and consulting services valued at $94,500. Of such shares, 14,250,000 were issued under the Company’s 2012 Employee Benefit Plan.

On February 1, 2012, the Company issued 600,000 shares of common stock as partial consideration for a $30,000 loan. The fair market value of the shares was determined to be $3,288.

On February 13, 2012, the Company issued 50 million shares of common stock to former Chief Executive Officer, Michael Brennan, in payment for $100,000 in accrued consulting fees.

On February 24, 2012, the Company issued 50 million shares of common stock to Chief Financial Officer, Victor Hollander, in payment for $100,000 in accrued consulting fees. On April 30, 2012, Mr. Hollander converted $350,000 in accrued debt, consisting of principal loans, interest, consulting fees and expenses, into 100 million shares of common stock at $0.0035 per share.

On April 1, 2012, the Company issued 20 million shares of common stock to Jeffrey Nunez, Chief Executive Officer, for consulting services rendered. The fair market value of the shares was determined to be $78,300.

On May 1, 2012, the Company issued 66,601,832 shares of common stock to Anthony M. Frank, a major stockholder, upon conversion of $189,000 in principal notes and $44,106 in accrued interest at a price of $0.0035 per share.

On July 31, 2012, the Company issued a total of 52,490,774 shares of common stock upon conversion of accrued payroll and vacation benefits by one employee. The shares were issued at the rate of $0.0035 per share, for a total conversion of $183,718.

Between May 9 and September 28, 2012, the Company issued a total of 800 million shares of common stock to Gregg Newhuis, a Director of the Company, for proceeds of $800,000, or $0.001 per share. Mr. Newhuis also received a one-year option to purchase up to an additional 133,333,333 shares of common stock at $0.003 per share in September 2012. This option was cancelled in October 2012.

The Company issued an additional 200 million shares of common stock for $0.001 per share to a major stockholder during May and September 24, 2012 for proceeds of $200,000. In September 2012, this stockholder also received a one-year option to purchase up to 33,333,333 shares of common stock at $0.003 per share.

Between April 20 and September 28, 2012, the Company issued Mr. Nunez a total of 17,756,101 shares of common stock valued at $53,000 pursuant to the transaction fee arrangement contained in his April 2012 Consulting Agreement.

On October 31, 2012, the Company issued 12,208,997 shares of common stock at $0.003 per share to Victor Hollander, a Director and the Company’s Chief Financial Officer, in payment of $36,627 in accrued fees for services rendered.

Redeemable Preferred Stock

The redeemable preferred stock, issued in 1987 to the then holders of the common and Class B common stock, had a redemption date in 1991. The redeemable preferred stock has not been redeemed due to a lack of “legally available funds.” These shares must be redeemed by the Company as soon as possible for $0.01 per share at any time the Company has the “legally available funds” for the redemption. There was a conversion feature to this redeemable preferred stock, which, with the passing of time, has lapsed. The Company believes the definition of “legally available funds” to be the amount under California law from which dividends could be paid by a corporation that does not have retained earnings. In general, California law provides that to the extent a corporation’s assets, excluding intangible and deferred assets, are at least equal to (a) the amount of the proposed distribution, and (b) 1.25 times its liabilities, excluding deferred taxes, deferred income, and deferred credits, a corporation may pay dividends. Under this definition, the Company had “legally available funds” as of October 31, 2000 and 1999. As a result, the Company is in default under the redemption provisions of the redeemable preferred stock.

The redeemable preferred stock is not assignable or transferable, except upon death or upon approval of a majority of the members of the Board of Directors not holding such shares and is not entitled to receive any dividends.

Preferred Stock

The Company is authorized to issue 1,000,000 shares of Preferred Stock, $1.00 par value. The terms of the Preferred Stock, or any series thereof, may be determined from time to time by the Board of Directors. Such shares may be convertible into Common Stock and may have rank superior to the Common Stock in the payment of dividends, liquidation rights, voting and other rights, preferences and privileges. Future shares of Preferred Stock may be issued by the Company without submitting a proposal regarding the issuance of such shares to a vote of holders of Common Stock. The Company in the future could issue Preferred Stock in a situation designed to discourage a tender offer. The Company has no present plans to issue any shares of Preferred Stock.

In January 2001, the Board of Directors authorized 250,000 shares of Series C preferred stock. Each share of Series C preferred stock is convertible at the option of the holder into four (4) shares of common stock. As of October 31, 2012, there were no shares of Series C preferred stock issued or outstanding.

Also in January 2001, the Board of Directors authorized 500,000 shares of Series D preferred stock each of which is convertible into two (2) shares of common stock at the option of the holder. There were no shares of Series D preferred stock issued or outstanding at October 31, 2012.

Voting Rights

Each share of the Company’s common stock and redeemable preferred stock is entitled to one vote per share. Shares of the Company’s Series C and Series D convertible preferred stock carry no voting rights.

Liquidation Preferences

In the event of liquidation or dissolution of the Company, the holders of the common stock and redeemable preferred stock shall be entitled to receive an equal amount per share, provided, however, in no instance shall a share of redeemable preferred stock receive more than $0.01 per share.

In any liquidation or dissolution of the Company, the holder of the Series C convertible preferred stock will be entitled to a liquidation preference of $4 per share.

In any liquidation or dissolution of the Company, the holder of the Series D convertible preferred stock will be entitled to a liquidation preference of $2 per share.