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v2.4.0.6
Stockholders' Equity
6 Months Ended
Jun. 30, 2011
Notes to Financial Statements  
Stockholders' Equity

NOTE 6 – STOCKHOLDERS’ EQUITY

 

Preferred stock

 

In February 2008, a majority of the Company’s subsidiary shareholders approved an amendment to the Articles of Incorporation of the subsidiary to allow 50,000,000 shares of common stock to be authorized and 10,000,000 shares of no par value preferred stock to be authorized.  Included in the preferred shares is 5,000,000 shares designated as Series A Preferred Stock (“Series A”), of which there are ten sub-series.  The first set of sub-series are (Series A-1, A-2, A-3, A-4, A-5) of 500,000 shares in each sub-series, with a par value and redemption value of $1,000 per share.  The second set of sub-series are (Series A-6, A-7, A-8, A-9, A-10) of 500,000 shares each, with a par value of $1,000 and the redemption value to be determined by the Board of Directors at a future time.

 

As of the date of this report, the Company has been unable to authorize preferred stock in the parent entity to allow the preferred stock exchange discussed in Note 1 “Share Exchange” to be completed.  However, as the preferred stockholders of the subsidiary have legal rights to own preferred stock of the parent, the Company has accounted for the exchange as if it has occurred, in substance and reflects this preferred stock in the consolidated financial statements as issuable.

 

Other rights and preferences of the Series A preferred stock are as follows:

 

Dividends: Dividends payable pro rata on all outstanding Series A Preferred Stock on a quarterly basis at a rate of 6% of redemption value per year during the first year of issuance, 8% of redemption value per year during the second year of issuance and 12% of redemption value per year during all years through redemption.  The dividends are cumulative.

 

Optional redemption: any time upon 30 days notice to shareholder the Company has the Option to redeem the Series A Preferred Stock. Accrued but unpaid dividends are to be paid first.

 

Liquidation Preference: The Series A shares have preference over all other classes of capital stock.

 

Conversion: right to convert at any time. Conversion Rate: The number of shares to be issued upon conversion will equal the stated redemption value divided by the greater of $1.00 or 20% below the 20 day average trading price of common stock if company is publicly trade at time of conversion.  Any accrued but unpaid dividends can also be converted at the option of the holder.  Conversion price is subject to standard anti-dilution provisions.

 

No voting rights. However if more than 50% of Series A Preferred Stock is outstanding , holders will be require to approve a change in the company’s line of business, payment of dividends on common stock, repurchase of common stock and all actions concerning preferred stock.

 

On February 12, 2008 the Board of Directors authorized the offering to accredited investors only of Series A Convertible Preferred Stock at the offering price of $1,000 per share in exchange for real property and accordingly, in February 2008, the Company issued 210 shares of its Series A-3 preferred stock in exchange for real estate valued at $202,000. At June 30, 2011 and December 31, 2010, theses shares remain outstanding.

 

Common stock issued for cash

 

In March 2011, the Company initiated a $250,000 offering at $0.25 per share pursuant to Regulation D.  Proceeds from this offering were $230,000, and the Company issued 920,000 shares of its common stock, “A” warrants to purchase 460,000 shares of its common stock at an exercise price of $0.50, expiring six months following the purchase date and “B” warrants to purchase 460,000 shares of its common stock at an exercise price of $1.00, expiring 9 months following purchase date to five investors.  On July 29, 2011, in an effort to induce its warrant holders to exercise their $0.50 “A” warrants (the “Warrants Inducement”), the Company offered to extend the term of the outstanding $1.00 “B” warrants by three months and to reduce the exercise price to $0.50 for every $0.50 “A” warrant exercised (See Note 8).  

 

Common stock issued for services

 

On February 9, 2011, (employment date or grant date) NB Regeneration, a wholly-owned subsidiary of the Company entered into a five year employment agreement with Michael Sydow (The “Sydow Employment Agreement”) to serve as NB Regeneration’s Chief Executive Officer.  Upon execution, the Company granted 5,000,000 shares valued, for financial accounting purposes on the grant date at the contemporaneous private placement price of $0.25 per share for a total $1,250,000. The shares vest to Mr. Sydow as follows:   September 1, 2011, 1,000,000 shares; Upon the occurrence of the execution of a binding definitive agreement with Panamanian partners relative to the South American fertilizer project, 2,000,000 shares; 500,000 shares annually on the contract anniversary date years 2-5. In January of 2012 the Company and Mr. Sydow agreed to delay any vesting of stock and options as delineated in the employment pending an amendment to the employment agreement or reshaping of their association. Under ASC 718 "Compensation - Stock Compensation", the Company will recognize the $1,250,000 value as follows: $250,000 on the September 1, 2011 vesting date; $500,000 upon satisfaction of the performance condition; and $500,000 pro rata over the 4 year vesting period. Accordingly, for the six months ended June 30, 2011, the Company did not record stock-based compensation related to these shares and will record stock-based compensation of $250,000 related to the issuance of the 1,000,000 common shares on the vesting date of September 1, 2011 (See Note 8).

 

Stock options

 

In connection with the Sydow Employment Agreement, subject to continued employment, Mr. Sydow was also awarded  2,000,000 common stock options that cliff vest 500,000 per year over four years with first vesting date beginning on January 13, 2012.  However, on January 10, 2012 the Company and Mr. Sydow agreed to delay any vesting of stock and options as delineated in the employment pending an amendment to the employment agreement or reshaping of their association. The options each have a term of one year from the vesting date and have exercise prices of $0.50, $1.00, $1.50 and $2.00 for each 500,000 that vest, respectively.  The value of these options on the grant date was approximately $490,000 based upon the following range of Black-Scholes assumptions; exercise prices from $0.50 to $2.00, volatility from 372% to 448% using actual historical volatility, an expected term based on simplified method from 1 to 2.5 years and discount rate averaging 0.81% and is to be recognized in years one through four, respectively, approximately $121,000, $121,000, $123,000 and $125,000. For the six months ended June 30, 2011, the Company recorded stock-based compensation expense of $49,349.

 

On May 16, 2011, the Company entered into a five year employment agreement with Elliot Bellen to serve as the Company’s Chief Executive Officer.  On the employment agreement date, subject to continued employment, Mr. Bellen was awarded  2,000,000 common stock options that cliff vest 500,000 per year over four years with first vesting date on January 1, 2012.  The options each have a term of one year from the vesting date and have exercise prices of $0.50, $1.00, $1.50 and $2.00 for each 500,000 that vest, respectively.  The value of these options on the grant date was approximately $486,000 based upon the following range of Black-Scholes assumptions; Exercise prices from $0.50 to $2.00, volatility from 353% to 430% using actual historical volatility, an expected term based on simplified method from 1 to 2.5 years and discount rate averaging 0.81% and is to be recognized $119,000, $121,000, $122,000 and $124,000 approximately in years one through four, respectively. For the six months ended June 30, 2011, the Company recorded stock-based compensation expense of $22,317.

 

At June 30, 2011, there was a total of approximately $904,300 of unrecognized compensation expense related to these non-vested option-based compensation arrangements.

 

Stock option activity for the six months ended June 30, 2011 is summarized as follows:

 

  Six Months Ended June 30, 2011
  Number of Warrants   Weighted Average Exercise Price
Balance at December 31, 2010                           - $                                 -
Granted          4,000,000                             1.25
Exercised                           -                                   -
Forfeited                           -                                   -
Balance at June 30, 2011          4,000,000 $                           1.25
Stock options exercisable at June 30, 2011                           - $                                 -

 

The following table summarizes the shares of the Company's common stock issuable upon exercise of stock options outstanding at June 30, 2011:

 

Stock Options Outstanding   Stock Option Exercisable
  Range of Exercise Price   Number Outstanding at June 30, 2011   Weighted Average Remaining Contractual Life (Years)   Weighted Average Exercise Price  

Number

Exercisable at

June 30, 2011

  Weighted Average Exercise Price
$ 0.50                  1,000,000   1.454 $           0.50                              - $                        -
$ 1.00                  1,000,000   2.54             1.00                              -                          -
$ 1.50                  1,000,000   3.54             1.50                              -                          -
$ 2.00                  1,000,000   4.54             2.00                              -                          -
                     4,000,000   3.04 $           1.25                              - $                        -

 

Warrants

 

Warrant activity for the six months ended June 30, 2011 is summarized as follows:

 

  Six Months Ended June 30, 2011
  Number of Warrants   Weighted Average Exercise Price
Balance at December 31, 2010                                 - $                                      -
Granted                    920,000                                 0.75
Exercised                                 -                                        -
Forfeited                                 -                                        -
Balance at June 30, 2011                    920,000 $                               0.75
Warrants exercisable at June 30, 2011                    920,000 $                               0.75

 

The following table summarizes the shares of the Company's common stock issuable upon exercise of warrants outstanding at June 30, 2011:

 

Warrants Outstanding   Warrants Exercisable
  Range of Exercise Price   Number Outstanding at June 30, 2011   Weighted Average Remaining Contractual Life (Years)   Weighted Average Exercise Price  

Number

Exercisable at

June 30, 2011

  Weighted Average Exercise Price
$ 0.50 - 1.00                      760,000   0.39               0.75                  760,000                     0.75
                         760,000   0.39 $             0.75                  760,000 $                   0.75