5. Convertible notes and warrants
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Dec. 31, 2011
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Debt Disclosure [Text Block] |
Convertible
debentures consist of the following:
2008
Winter Offering
From
November 24, 2008 to December 5, 2008, the Company
conducted an offering (the “2008 Winter
Offering”) of up to $500,000 aggregate face amount of
its Convertible Notes. A total of $524,700
aggregate face amount of the 2008 Winter Notes were sold
for an aggregate purchase price of $477,000 net
proceeds. Therefore, while the stated interest
on the 2008 Winter Notes is 0%, the implied interest rate
on the 2008 Winter Notes is 10%. The 2008 Winter
Notes will mature on the first anniversary of the date of
issuance. The 2008 Winter Notes are convertible,
at the option of the noteholders, into shares of common
stock of the Company (the “Conversion Shares”)
at a conversion price equal to the average of the closing
bid price of the Company’s common stock for the five
trading days preceding the closing date of the 2008 Winter
Offering (the “Conversion
Price”). Up to 3,086,470 Conversion Shares
are issuable at a Conversion Price of $0.17 per
share.
Each
of the investors in the 2008 Winter Offering received, for
no additional consideration, a warrant (the “ 2008
Winter Warrants”), entitling the holder to purchase a
number of shares of the Company’s common stock equal
to 50% of the number of shares of common stock into which
the ( 2008 Winter Notes) are convertible (the “2008
Winter Warrant Shares”). Each 2008 Winter Warrant is
exercisable on a cash basis only at a price of $0.30 per
share, and is exercisable for a period of two years from
the date of issuance. Up to 1,543,235 2008
Winter Warrant Shares are initially issuable upon exercise
of the 2008 Winter Warrants.
The
aggregate value of the Winter 2008 Offering Warrants issued
in connection with the December 5, 2008 closing were valued
at $168,925 using the Black-Scholes-Merton option valuation
model with the following assumptions; risk-free interest
rate of 3.42%; dividend yield of 0%; volatility factors of
the expected market price of common stock of 153.56%; and
an expected life of two years (statutory term) and vest
immediately upon issuance. The Company also
determined that the notes contained a beneficial conversion
feature of $308,075. The value of the Winter
2008 Offering Warrants, the beneficial conversion feature,
and the transaction fees of $47,700 are considered as debt
discount and were amortized over the life of the
Note.
As
of December 31, 2011, investors have converted $524,700 of
the Convertible Notes into 3,086,470 shares of the
Company’s common stock. As of December 31,
2011, there was no outstanding balance.
2009
Spring Offering
From
March 17, 2009 to April 30, 2009, the Company conducted and
concluded a private offering (the “Spring 2009
Offering”) of up to $300,000 aggregate face amount of
its convertible notes (the “Spring 2009 Notes”)
with 11 accredited investors. A total of $181,500 aggregate
face amount of the Spring 2009 Notes were sold for an
aggregate purchase price of $165,000. The Spring
2009 Notes mature on the first anniversary of their date of
issuance, are convertible, at the option of the noteholder,
into up to 672,222 shares of common stock of the Company at
a conversion price of $0.27 per share.
Each
of the investors in the Spring 2009 Offering received, for
no additional consideration, a warrant (the “Spring
2009 Warrants”), entitling the holder to purchase a
number of shares of the Company’s common stock equal
to 50% of the number of shares of common stock into which
the Spring 2009 Notes are convertible (the “Warrant
Shares”). Each Spring 2009 Warrant is
exercisable on a cash basis only at an initial price of
$0.50 per share, and is exercisable for a period of two
years. Up to 336,111 Warrant Shares are
initially issuable on exercise of the Spring 2009
Warrants.
The
Company received $165,000 in net proceeds in the Spring
2009 Offering which was used for general corporate purposes
and working capital. The aggregate value of the Spring 2009
Offering Warrants issued in connection with the April 30,
2009 closing were valued at $39,994 using the
Black-Scholes-Merton option valuation model with the
following assumptions; risk-free interest rate of 0.94%;
dividend yield of 0%; volatility factors of the expected
market price of common stock of 156.39%; and an expected
life of two years (statutory term) and vest immediately
upon issuance. The Company also determined that
the notes contained a beneficial conversion feature of
$96,827. The value of the Spring 2009 Offering
Warrants, the beneficial conversion feature, and the
transaction fees of $16,500 are considered as debt discount
and were amortized over the life of the Note.
As
of December 31, 2011, investors have converted $181,500 of
the Convertible Notes plus penalty and interest of $7,538
into 679,768 shares of the Company’s common
stock. As of December 31, 2011, there was no
balance outstanding
2009
Wellfleet Offering
On
November 20, 2009, the Company completed a private
financing of $75,000 principal amount of 7% Convertible
Promissory Notes (the “Notes”) and 300,000
Common Stock Purchase Warrants exercisable at $.30 per
share (the “Warrants”), pursuant to a
Securities Purchase Agreement (the “Purchase
Agreement”) with 3 accredited investors (the
“Note Offering”), through Sandgrain Securities,
Inc., as placement agent.
The
Notes are initially convertible into the Company’s
common stock at a price of $.25 per share and accrue
interest at 7% per year with a default rate of 10%, payable
quarterly in cash. Interest payments are payable
in stock at the sole discretion of the Note holders, or, in
the event that shares issuable thereon are registered under
the Securities Act of 1933, as amended (the
“Act”), or otherwise freely tradable pursuant
to Rule 144, at the discretion of the Company as well. The
Notes and any unpaid interest are due and fully payable on
September 28, 2012. The conversion price of the
Notes is adjustable for corporate events such as merger,
reclassification or stock splits.
Pursuant
to the terms of the Purchase Agreement, and among other
terms, in the event the Company conducts any subsequent
financings (each, a “Follow On Offering”) of
any kind other than an offering of securities substantially
similar to the Notes and Warrants or certain other exempted
issuances enumerated in the Notes, the Notes may, at the
discretion of each holder thereof, be exchanged
in whole or in part to the extent of outstanding principal
and/or interest in such Note, into the securities offered
in the Follow On Offering, by applying and exchanging the
outstanding principal and interest of such Notes towards
the purchase price of the securities offered in such Follow
On Offering, at the same price and terms of the Follow On
Offering.
The
Company paid a placement agent fee of (i) $6,000 in cash,
(ii) 24,000 shares of Common Stock constituting 8% of the
number of Conversion Shares initially issuable upon
exercise of the Notes, and (iii) 24,000 warrants,
substantially similar to the Warrants sold to investors
(the “Placement Agent Warrants”), in connection
with the Note Offering, in addition to legal fees.
Each
of the warrant agreements included an anti-dilution
provision that allowed for the automatic reset of the
exercise price upon any future sale of common stock or
warrants at or below the current exercise
price. The Company considered the current
Financial Accounting Standards Board guidance of
“Determining Whether an Instrument Indexed to an
Entity’s Own Stock” which indicates that any
adjustment to the fixed amount (either conversion price or
number of shares) of the instrument regardless of the
probability or whether or not within the issuers’
control, means the instrument is not indexed to the issuers
own stock. Accordingly, the Company determined that as the
strike price of these warrants contain exercise prices that
may fluctuate based on the occurrence of future offerings
or events, and as such is not a fixed
amount.. As a result, the Company determined
that these warrants are not considered indexed to the
Company’s own stock and characterized the fair value
of these warrants as derivative liabilities upon
issuance.
The
Company determined that the fair value of the warrant
liability at issuance on November 20, 2009 to be $75,000
based upon a weighted average Black-Sholes-Merton
calculation. The Company recorded the full value of the
derivative as a liability at issuance with an offset to
valuation discount. The fair value of the
warrant liability as of December 31, 2010 was $129,000 (see
Note 7).
As
of December 31, 2011 investors have converted $75,000 of
the Convertible Notes plus $1,750 of accrued interest into
307,000 shares of the Company’s common
stock. At December 31, 2011 there was no
outstanding balance.
2009
Fall Offering
From
October 2, 2009 to January 15, 2010, the Company conducted
and completed a private offering (the “Fall 2009
Offering”) consisting of an aggregate of $1,588,125
of 7% Convertible Promissory Notes (the
“Notes”) with interest compounded quarterly at
the annual rate of 7% payable at maturity, and warrants to
purchase an aggregate of 6,352,500 shares of our common
stock (the “Fall 2009
Warrants”). The Company received
$1,284,425 net proceeds, of which $344,500 was received as
of December 31, 2009. The Fall 2009 Notes mature
on the second anniversary of the closing of this offering
and will be convertible, at the option of the noteholder,
into up to 6,352,500 shares of our common stock at a
conversion price of $0.25 per share. The Fall
2009 Warrants are for a term of three years at an exercise
price of $0.30 per share.
Each
of the warrant agreements included an anti-dilution
provision that allowed for the automatic reset of the
exercise price upon any future sale of common stock or
warrants at or below the current exercise
price. The Company considered the current
Financial Accounting Standards Board guidance of
“Determining Whether an Instrument Indexed to an
Entity’s Own Stock” which indicates that any
adjustment to the fixed amount (either conversion price or
number of shares) of the instrument regardless of the
probability or whether or not within the issuers’
control, means the instrument is not indexed to the issuers
own stock. Accordingly, the Company determined that as the
strike price of these warrants contain exercise prices that
may fluctuate based on the occurrence of future offerings
or events, and as such is not a fixed amount. As a result,
the Company determined that these warrants are not
considered indexed to the Company’s own stock and
characterized the fair value of these warrants as
derivative liabilities upon issuance.
The
Company determined that the fair value of the warrant
liability at issuances to be $3,027,815 based upon a
weighted average Black-Scholes-Merton calculation (See Note
8), of which, $654,978 was recorded on December 31, 2009
and $2,372,837 was recorded on January 15,
2010. The Company recorded the full value of the
derivative of $2,372,837 as a liability at issuance with an
offset to valuation discount. As the fair value of the
liability of $2,372,837 exceeded the note value of
$1,243,625, the excess of the liability over the note
amount of $1,129,212 was considered to be cost of the
private placement and was recorded during the
period. The fair value of the warrant liability
as of December 31, 2011 was $1,251,773 (see Note 7).
As
of December 31, 2011, investors have converted $1,578,125
of the Convertible Notes plus interest of $11,502 into
6,358,507 shares of the Company’s common
stock. The outstanding balance at December 31,
2011 was $11,456 which includes $1,456 in accrued
interest.
2010
Winter Offering
From
February 15, 2010 to March 31, 2010, the Company conducted
a private offering (the “Winter 2010 Offering”)
consisting of an aggregate of $885,863 face amount of its
Convertible Promissory Notes (the “Winter
2010 Notes”) have been sold for an
aggregate purchase price of $805,330. While the
stated interest rate on the Winter 2010 Notes is 0%, the
implied interest rate on the Winter 2010 Notes is 10% per
annum. The Winter 2010 Notes mature on the first
anniversary of their date of issuance. The Winter 2010
Notes are convertible, at the option of the noteholder,
into 2,214,657 shares of common stock of the Company (the
“Conversion Shares”) at an initial conversion
price of $0.40 per share (the “Conversion
Price”).
Each
of the investors in the Winter 2010 Offering received, for
no additional consideration, a warrant (the “Winter
2010 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 2010 Notes are convertible (the “Warrant
Shares”). Each Winter 2010 Warrant is
exercisable on a cash basis only at an initial price of
$0.40 per share, and is exercisable immediately upon
issuance and for a period of two (2) years from the date of
issuance. Up to 2,214,657 Warrant Shares are initially
issuable to date on exercise of the Winter 2010
Warrants.
The
Company received $805,330 in net proceeds in the Winter
2010 Offering which was used for general corporate purposes
and working capital. The aggregate value of the Winter 2010
Offering Warrants issued were valued at $476,268 using the
Black-Scholes-Merton option valuation model with the
following assumptions; risk-free interest rate of 1.02;
dividend yield of 0%; volatility factors of the expected
market price of common stock of 135%; and an expected life
of two years (statutory term) and vest immediately upon
issuance. The Company also determined that the
notes contained a beneficial conversion feature of
$329,062. As of December 31, 2011, the aggregate
value of the Winter 2010 Offering Warrants, the beneficial
conversion feature and the transaction fees of $80,533 are
considered as debt discount and were fully amortized in
conjunction with the conversion of the notes.
As
of December 31, 2011, investors have converted $885,863 of
the Convertible Notes into 2,214,657 shares of the
Company’s common stock. There was no
outstanding balance at December 31, 2011.
2010
Spring Offering
From
April 15, 2010 to April 30, 2010, the Company conducted a
private offering (the “Spring 2010 Offering”)
consisting of an aggregate of $143,000 face amount of its
Convertible Promissory Notes (the “Spring
2010 Notes”) have been sold for an
aggregate purchase price of $130,000. While the
stated interest rate on the Spring 2010 Notes is 0%, the
actual interest rate on the Spring 2010 Notes is 10% per
annum. The Spring 2010 Notes mature on the first
anniversary of their date of issuance. The Spring 2010
Notes are convertible, at the option of the noteholder,
into 357,500 shares of common stock of the Company (the
“Conversion Shares”) at an initial conversion
price of $0.40 per share (the “Conversion
Price”).
Each
of the investors in the Spring 2010 Offering received, for
no additional consideration, a warrant (the “Spring
2010 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 Spring 2010 Notes are convertible (the “Warrant
Shares”). Each Spring 2010 Warrant is
exercisable on a cash basis only at an initial price of
$0.40 per share, and is exercisable immediately upon
issuance and for a period of two (2) years from the date of
issuance. Up to 357,500 Warrant Shares are initially
issuable to date on exercise of the Spring 2010
Warrants.
The
Company received $130,000 in net proceeds in the Spring
2010 Offering which was used for general corporate purposes
and working capital. The aggregate value of the Spring 2010
Offering Warrants issued were valued at $62,730 using the
Black-Scholes-Merton option valuation model with the
following assumptions; risk-free interest rate of .41;
dividend yield of 0%; volatility factors of the expected
market price of common stock of 110%; and an expected life
of two years (statutory term) and vest immediately upon
issuance. The Company also determined that the
notes contained a beneficial conversion feature of
$67,270. As of December 31, 2011, the aggregate
value of the Spring 2010 Offering Warrants, the beneficial
conversion feature and the transaction fees of $13,000 are
considered as debt discount and were fully amortized in
conjunction with the conversion of the notes.
As
of December 31, 2011, investors have converted $143,000 of
the Convertible Notes into 357,000 shares of the
Company’s common stock. There was no
outstanding balance at December 31, 2011.
2010
Summer Offering
From
June 14, 2010 to July 31, 2010, the Company conducted and
concluded a private offering (the “Summer 2010
Offering”) consisting of up to $500,000 aggregate
face amount of its convertible notes (the “ Summer
2010 Notes). A total of $392,150 Summer 2010 Notes were
sold to twenty six accredited investors for an aggregate
purchase price of $356,500. While the stated
interest rate on the Summer 2010 Notes is 0%, the actual
interest rate on the Summer 2010 Notes is 10% per annum.
The Summer 2010 Notes mature on the first anniversary of
the closing of this offering and will be convertible, at
the option of the noteholder, into up to 1,568,600 shares
of our common stock at a conversion price of $0.25 per
share (the “Conversion Price”).
Each
of the investors in the Summer 2010 Offering will receive,
for no additional consideration, a warrant (the
“Summer 2010 Warrants”), entitling the holder
to purchase a number of shares of our common stock equal to
100% of the number of shares of common stock into which the
Summer 2010 Notes are convertible (the “Warrant
Shares”). Each Summer 2010 Warrant is
exercisable on a cash basis only at an initial price of
$0.30 per share, and is exercisable for a period
of twenty four months. Up to 1,568,600 Warrant
Shares are initially issuable on exercise of the Summer
2010 Warrants.
The
Company received $356,500 in net proceeds in the Summer
2010 Offering which was used for general corporate purposes
and working capital. The aggregate value of the Summer 2010
Offering Warrants issued were valued at $209,512 using the
Black-Scholes-Merton option valuation model with the
following assumptions; risk-free interest rate of .55;
dividend yield of 0%; volatility factors of the expected
market price of common stock of 132%; and an expected life
of two years (statutory term) and vest immediately upon
issuance. The Company also determined that the
notes contained a beneficial conversion feature of
$146,988. As of December 31, 2011, the aggregate
value of the Summer 2010 Offering Warrants, the beneficial
conversion feature and the transaction fees of $35,650 are
considered as debt discount and were fully amortized in
conjunction with the conversion of the notes.
As
of December 31, 2011, investors have converted $392,150 of
the Convertible Notes into 1,568,600 shares of the
Company’s common stock. There was no
outstanding balance at December 31, 2011.
2010
Fall Offering
From
August 10, 2010 to September 30, 2010, the Company
conducted and concluded a private offering (the “Fall
2010 Offering”) consisting of up to $600,000
aggregate face amount of its convertible notes (the
“Fall 2010 Notes). A total of $174,482 Fall 2010
Notes were sold to ten accredited investors for an
aggregate purchase price of $158,620. While the
stated interest rate on the Fall 2010 Notes is 0%, the
actual interest rate on the Fall 2010 Notes is 10% per
annum. The Fall 2010 Notes mature on the first anniversary
of the closing of this offering and will be convertible, at
the option of the noteholder into 697,928 shares of the
Company’s common stock at a conversion price of $0.25
per share (the “Conversion Price”).
Each
of the investors in the Fall 2010 Offering will receive,
for no additional consideration, a warrant (the “Fall
2010 Warrants”), entitling the holder to purchase a
number of shares of our common stock equal to 100% of the
number of shares of common stock into which the Fall 2010
Notes are convertible (the “Warrant
Shares”). Each Fall 2010 Warrant is
exercisable on a cash basis only at an initial price of
$0.30 per share, and is exercisable for a period of twenty
four months. Up to 697,928 Warrant Shares are
initially issuable on exercise of the Fall 2010
Warrants.
The
Company received $158,620 in net proceeds in the Fall 2010
Offering which was used for general corporate purposes and
working capital. The aggregate value of the Fall 2010
Offering Warrants issued were valued at $88,113 using the
Black-Scholes-Merton option valuation model with the
following assumptions; risk-free interest rate of .42;
dividend yield of 0%; volatility factors of the expected
market price of common stock of 135%; and an expected life
of two years (statutory term) and vest immediately upon
issuance. The Company also determined that the
notes contained a beneficial conversion feature of
$70,507. As of December 31, 2011, the aggregate
value of the Fall 2010 Offering Warrants, the beneficial
conversion feature and the transaction fees of $15,862 are
considered as debt discount and were fully amortized in
conjunction with the conversion of the notes.
As
of December 31, 2011, investors have converted $174,482 of
the Convertible Notes into 697,928 shares of the
Company’s common stock. At December 31,
2011 there was no outstanding balance.
2010
Fall Offering #2
From
October 4, 2010 to November 30, 2010, the Company conducted
and concluded a private offering (the “Fall 2010
Offering #2”) consisting of up to $3,000,000
aggregate face amount of its convertible notes (the “
Fall 2010 Notes). A total of $940,347 Fall 2010 #2 Notes
were sold to ten accredited investors for an aggregate
purchase price of $854,861. While the stated
interest rate on the Fall 2010 #2 Notes is 0%, the actual
interest rate on the Fall 2010 #2 Notes is 10% per annum.
The Fall 2010 #2 Notes mature on the first anniversary of
the closing of this offering and will be convertible, at
the option of the noteholder into 3,761,386 shares of the
Company’s common stock at a conversion price of $0.25
per share (the “Conversion Price”).
Each
of the investors in the Fall 2010 #2 Offering will receive,
for no additional consideration, a warrant (the “Fall
2010 #2 Warrants”), entitling the holder to purchase
a number of shares of our common stock equal to 100% of the
number of shares of common stock into which the Fall 2010
#2 Notes are convertible (the “Warrant
Shares”). Each Fall 2010 Warrant is
exercisable on a cash basis only at an initial price of
$0.30 per share, and is exercisable for a period of twenty
four months. Up to 3,761,386 Warrant Shares are
initially issuable on exercise of the Fall 2010 #2
Warrants.
The
Company received $854,861 in net proceeds in the Fall 2010
#2 Offering which was used for general corporate purposes
and working capital. The aggregate value of the Fall 2010
#2 Offering Warrants issued were valued at $436,986 using
the Black-Scholes-Merton option valuation model with the
following assumptions; risk-free interest rate of .27;
dividend yield of 0%; volatility factors of the expected
market price of common stock of 121%; and an expected life
of two years (statutory term) and vest immediately upon
issuance. The Company also determined that the
notes contained a beneficial conversion feature of
$417,875. As of December 31, 2011, the aggregate
value of the Fall 2010 #2 Offering Warrants, the beneficial
conversion feature and the transaction fees of $85,486 are
considered as debt discount and will be amortized over the
life of the notes.
As
of December 31, 2011, investors have converted $940,347 of
the Convertible Notes into 3,761,386 shares of the
Company’s common stock. There was no
outstanding balance at December 31, 2011.
2011
Winter Offering
From
December 13, 2010 through February 28, 2011, the
Company conducted a private offering (the
“Winter 2011 Offering”) of up to $3,000,000
aggregate face amount of its convertible notes (the
“Winter 2011 Notes”). A total of
$2,588,422 aggregate face amount of the Winter
2011 Notes were sold for an aggregate purchase
price of $2,353,111. While there was no stated
interest rate on the Winter 2011 Notes, the implied
effective interest rate on the Winter 2011 Notes is 10% per
annum. The Winter 2011 Notes mature on the first
anniversary of their date of issuance. The Winter 2011
Notes are convertible, at the option of the note holder,
into 10,353,688 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 2011 Offering received, for
no additional consideration, a warrant (the “Winter
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 Winter 2011 Notes are convertible (the “Warrant
Shares”). Each Winter 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 10,353,688 Warrant Shares are initially
issuable to date on exercise of the Winter 2011
Warrants.
The
Company received $2,353,111 in net proceeds in the 2011
Winter Offering which was used for general corporate
purposes and working capital. The aggregate value of the
2011 Offering Warrants issued were valued at $1,368,888
using the Black-Scholes-Merton option valuation model with
the following assumptions; risk-free interest rate of .25;
dividend yield of 0%; volatility factors of the expected
market price of common stock of 130%; and an expected life
of two years (statutory term) and vest immediately upon
issuance. The Company also determined that the
notes contained a beneficial conversion feature valued
at $984,223. The aggregate value of the
2011 Winter Offering Warrants, the beneficial conversion
feature and the implied discount and transaction fees of
$235,311 are considered as debt discount and are being
amortized over the life of the notes. The amortization
recorded during the period amounted to $2,497,076.
As
of December 31, 2011, investors have converted $2,500,422
of the Convertible Notes into 10,001,688 shares of the
Company’s common stock. The outstanding balance at
December 31, 2011 was $88,000.
2011
Spring Offering
From
March 14, 2011 through May 31, 2011, the
Company conducted a private offering (the
“Spring 2011 Offering”) of up to $1,000,000
aggregate face amount of its convertible notes (the
“Spring 2011 Notes”). A total of
$1,469,550 aggregate face amount of the Spring
2011 Notes were sold for an aggregate purchase price
of $1,335,955. While there was no stated
interest rate on the Spring 2011 Notes, the implied
effective interest rate on the Spring 2011 Notes is 10% per
annum. The Spring 2011 Notes mature on the first
anniversary of their date of issuance. The Spring 2011
Notes are convertible, at the option of the note holder,
into 5,878,200 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 Spring 2011 Offering received, for
no additional consideration, a warrant (the “Spring
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 Spring 2011 Notes are convertible (the “Warrant
Shares”). Each Spring 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 5,878,200 Warrant Shares are initially
issuable to date on exercise of the Spring 2011
Warrants.
The
Company received $1,335,955 in net proceeds in the 2011
Spring Offering which was used for general corporate
purposes and working capital. The aggregate value of the
2011 Spring Offering Warrants issued were valued at
$726,787 using the Black-Scholes-Merton option valuation
model with the following assumptions; risk-free interest
rate of .45; dividend yield of 0%; volatility factors of
the expected market price of common stock of 119%; and an
expected life of two years (statutory term) and vest
immediately upon issuance. The Company also determined
that the notes contained a beneficial conversion
feature valued at $609,168. The aggregate
value of the 2011 Spring Offering Warrants, the beneficial
conversion feature and the implied discount and transaction
fees of $133,595 are considered as debt discount and are
being amortized over the life of the notes. The
amortization recorded during the period amounted to
$1,425,861.
As
of December 31, 2011, investors have converted $1,469,550
of the Convertible Notes into 5,878,200 shares of the
Company’s common stock. There was no
outstanding balance at December 31, 2011.
2011
Summer Offering
From
June 24, 2011 through July 31, 2011, the
Company conducted a private offering (the
“Summer 2011 Offering”) of up to $1,000,000
aggregate face amount of its convertible notes (the
“Summer 2011 Notes”). A total of $487,783
aggregate face amount of the Summer 2011 Notes were
sold for an aggregate purchase price of
$443,439. While there was no stated interest
rate on the Summer 2011 Notes, the implied effective
interest rate on the Summer 2011 Notes is 10% per annum.
The Summer 2011 Notes mature on the first anniversary of
their date of issuance. The Summer 2011 Notes are
convertible, at the option of the note holder, into
1,951,132 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 Summer 2011 Offering received, for
no additional consideration, a warrant (the “Summer
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 Summer 2011 Notes are convertible (the “Warrant
Shares”). Each Summer 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 1,951,132 Warrant Shares are initially
issuable to date on exercise of the Summer 2011
Warrants.
The
Company received $443,439 in net proceeds in the 2011
Summer Offering which was used for general corporate
purposes and working capital. The aggregate value of the
2011 Summer Offering Warrants issued were valued at
$172,856 using the Black-Scholes-Merton option valuation
model with the following assumptions; risk-free interest
rate of .20; dividend yield of 0%; volatility factors of
the expected market price of common stock of 115%; and an
expected life of two years (statutory term) and vest
immediately upon issuance. The Company also
determined that the notes contained a beneficial conversion
feature valued at $270,583. The aggregate
value of the 2011 Summer Offering Warrants, the beneficial
conversion feature and the implied discount and transaction
fees of $44,344 are considered as debt discount and were
amortized in full upon conversion of the notes. The
amortization recorded during the period amounted to
$487,783.
As
of December 31, 2011, investors have converted $487,783 of
the Convertible Notes into 1,951,132 shares of the
Company’s common stock. There was no
outstanding balance as of December 31, 2011.
2011
Fall Offering
From
August 30, 2011 through October 15, 2011, the
Company conducted a private offering (the “Fall
2011 Offering”) of up to $1,000,000 aggregate face
amount of its convertible notes (the “Fall 2011
Notes”). A total of $170,720 aggregate face amount of
the Fall 2011 Notes were sold for an aggregate
purchase price of $155,200. While there was no
stated interest rate on the Fall 2011 Notes, the implied
effective interest rate on the Fall 2011 Notes is 10% per
annum. The Fall 2011 Notes mature on the first anniversary
of their date of issuance. The Fall 2011 Notes are
convertible, at the option of the note holder, into 682,880
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 2011 Offering received, for no
additional consideration, a warrant (the “Fall 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
2011 Notes are convertible (the “Warrant
Shares”). Each Fall 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
682,880 Warrant Shares are initially issuable to date on
exercise of the Fall 2011 Warrants.
The
Company received $155,000 in net proceeds in the 2011 Fall
Offering which was used for general corporate purposes and
working capital. The aggregate value of the 2011 Falll
Offering Warrants issued were valued at $50,958 using the
Black-Scholes-Merton option valuation model with the
following assumptions; risk-free interest rate of .28;
dividend yield of 0%; volatility factors of the expected
market price of common stock of 112%; and an expected life
of two years (statutory term) and vest immediately upon
issuance. The Company also determined that the
notes contained a beneficial conversion feature valued
at $104,242. The aggregate value of the 2011 Fall
Offering Warrants, the beneficial conversion feature and
the implied discount and transaction fees of $15,520 are
considered as debt discount and were amortized in full upon
conversion of the notes. The amortization recorded during
the period amounted to $87,992.
As
of December 31, 2011, investors have converted $66,220 of
the Convertible Notes into 264,880 shares of the
Company’s common stock. The outstanding balance at
December 31, 2011 was $104,500.
2011
Fall#2 Offering
From
October 24, 2011 through December 13, 2011, the Company
conducted a private offering (the “Fall#2 2011
Offering”) of up to $2,200,000 aggregate face amount
of its convertible notes (the “Fall#2 2011
Notes”). A total of $1,516,504 aggregate face amount
of the Fall#2 2011 Notes have been sold for an
aggregate purchase price of $1,378,640. While there is
no stated interest rate on the Fall#2 2011 Notes, the
implied effective interest rate on the Fall#2 2011 Notes is
10% per annum. The Fall#2 2011 Notes mature on the first
anniversary of their date of issuance. The Fall #2 2011
Notes are convertible, at the option of the note holder,
into 6,066,016 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#2 2011 Offering will receive,
for no additional consideration, a warrant (the
“Fall#2 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#2 2011 Notes are
convertible (the “Warrant Shares”). Each
Fall#2 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 6,066,016 Warrant Shares
are initially issuable to date on exercise of the Fall#2
2011 Warrants.
The
Company received $1,378,640 in net proceeds in the 2011
Fall#2 Offering which was used for general corporate
purposes and working capital. The aggregate value of the
2011 Fall#2 Offering Warrants issued were valued at
$650,823 using the Black-Scholes-Merton option valuation
model with the following assumptions; risk-free interest
rate of .24; dividend yield of 0%; volatility factors of
the expected market price of common stock of 112%; and an
expected life of two years (statutory term) and vest
immediately upon issuance. The Company also
determined that the notes contained a beneficial conversion
feature valued at $727,817. The aggregate value
of the 2011 Fall#2 Offering Warrants, the beneficial
conversion feature and the implied discount and transaction
fees of $137,864 are considered as debt discount and were
amortized in full upon conversion of the notes. The
amortization recorded during the period amounted to
$63,188.
As
of December 31, 2011, there was no note conversion to
common stock. The outstanding balance at December 31, 2011
was $1,516,504.
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