Stockholders' Deficit

12 Months Ended

Oct. 31, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Deficit

8. Stockholders’ Deficit

Common Stock

On November 29, 2012, the Company issued 200,000 shares of common stock to Gregg Newhuis, a Director of the Company, for proceeds of $100,000, or $0.50 per share.

On January 11, 2013, a major stockholder of the Company exercised a warrant to purchase 40,000 shares of common stock at $1.00 per share and the Company received $40,000 pursuant to the exercise.

On January 11, 2013, the Company’s Chief Financial Officer, Victor Hollander, purchased 3,333 shares of Common Stock for proceeds of $5,000, or $1.50 per share.

Between January 16, 2013 and February 22, 2013, the Company issued a total of 16,000 shares of common stock in payment for legal services rendered valued at $20,000.

Between February 6, 2013 and April 3, 2013, the Company issued a total of 211,764 to a major stockholder for proceeds of $180,000, or $0.85 per share. This same stockholder purchased an additional 60,000 shares of common stock for $30,000, or $0.50 per share, on August 13, 2013.

On April 26, 2013, the Company issued 435 and 196 shares of common stock to Jeffrey Nunez at $1.63 and $1.45 per share, respectively, in partial payment of previous transaction fees due him pursuant to an April 2012 agreement whereby he received a 5% transaction fee on all monies received by the Company.

On June 4, 2013, the Company sold 50,000 shares of common stock to a major stockholder for proceeds of $25,000, or $0.50 per share. As partial consideration for the transactions, the stockholder also received a three year warrant to purchase 50,000 shares of common stock at $0.50 per share and warrants to purchase 100,000 shares of common stock at $1.00 per share.

Between August 7, 2013 and October 17, 2013, the above-referenced major stockholder purchased an additional 40,000 shares of common stock at $0.50 per share, for proceeds of $20,000. The stockholder also received six-month warrants purchase an additional 20,000 shares of common stock for $1.00 per share.

On June 15, 2013, a stockholder converted a $12,500 principal loan, plus $1,299 in accrued interest, into 23,998 shares of common stock at $0.575 per share. And on June 28, 2013, this same stockholder purchased 13,333 shares of common stock from the Company for proceeds of $10,000, at $0.75 per share.

On September 5, 2013, an unaffiliated investor purchased 20,000 shares of common stock at $0.50 per share for total proceeds of $10,000.

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.