Annual report pursuant to section 13 and 15(d)

12. Subsequent events

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12. Subsequent events
12 Months Ended
Dec. 31, 2011
Subsequent Events [Text Block]
12.   
Subsequent events

2011 Fall#3 Offering

From December 19, 2011 through January 15, 2012, the Company  conducted a private offering (the “Fall#3 2011 Offering”) of up to $3,000,000 aggregate face amount of its convertible notes (the “Fall#3 2011  Notes”). A total of $1,020,734 aggregate face amount of the Fall#3 2011  Notes were sold for an aggregate purchase price of $927,940.  While the stated interest rate on the Fall#3 2011 Notes is 0%, the actual interest rate on the Fall#3 2011 Notes is 10% per annum. The Fall#3 2011 Notes mature on the first anniversary of their date of issuance. The Fall#3 2011 Notes are convertible, at the option of the noteholder, into 4,082,936 shares of common stock of the Company (the “Conversion Shares”) at an initial conversion price of $0.25 per share (the “Conversion Price”).

Each of the investors in the Fall#3 2011 Offering received, for no additional consideration, a warrant (the “Fall#3 2011 Warrants”), entitling the holder to purchase a number of shares of the Company’s common stock equal to 100% of the number of shares of common stock into which the Fall#3 2011 Notes are convertible (the “Warrant Shares”).  Each Fall#3 2011 Warrant is exercisable on a cash basis only at an initial price of $0.30 per share, and is exercisable immediately upon issuance and for a period of two (2) years from the date of issuance. Up to 4,082,936 Warrant Shares are initially issuable to date on exercise of the Fall#3 2011 Warrants.

2012 Winter Offering

From January 24, 2012 through February 3, 2012, the Company  conducted a private offering (the “Winter 2012 Offering”) of up to $2,000,000 aggregate face amount of its convertible notes (the “Winter 2012  Notes”). A total of $451,550 aggregate face amount of the Winter 2012  Notes were sold for an aggregate purchase price of $410,500.  While the stated interest rate on the Winter 2012 Notes is 0%, the actual interest rate on the Winter 2012 Notes is 10% per annum. The Winter 2012 Notes mature on the first anniversary of their date of issuance. The Winter 2012 Notes are convertible, at the option of the noteholder, into 1,806,200 shares of common stock of the Company (the “Conversion Shares”) at an initial conversion price of $0.25 per share (the “Conversion Price”).

Each of the investors in the Winter 2012 Offering received, for no additional consideration, a warrant (the “Winter 2012 Warrants”), entitling the holder to purchase a number of shares of the Company’s common stock equal to 100% of the number of shares of common stock into which the Winter 2012 Notes are convertible (the “Warrant Shares”).  Each Winter 2012 Warrant is exercisable on a cash basis only at an initial price of $0.30 per share, and is exercisable immediately upon issuance and for a period of two (2) years from the date of issuance. Up to 1,806,200 Warrant Shares are initially issuable to date on exercise of the Winter 2012 Warrants.

Increase in Outstanding Shares

During the period from January 1, 2012 through March 15, 2012, the Company issued 6,436,764 shares of its common stock.  This was comprised of the following:

The Company issued 5,936,764 shares of its common stock upon conversion of $1,484,191 of debt to its existing convertible note holders.

The Company issued 500,000 shares of its common stock per consulting agreement with Integra Consulting Group, LLC, valued at $150,000.  The shares were valued at the trading price at the date of the agreement.

Employment Agreement Chief Financial Officer

On February 1, 2012, the Company entered into a five year  employment agreement with Greggory M. Bigger as the Company’s Chief Financial Officer.  Pursuant to the agreement, Mr. Bigger will receive an annual salary of $120,000 and options to purchase 4,000,000 shares of common stock at $0.25 per share.  The options valued at $1,207,193 using the Black-Scholes Option Pricing model vest over five years and will expire on  February 1, 2022.