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v2.4.0.6
Equity
12 Months Ended
Aug. 31, 2012
Equity:  
Schedule of Derivative Financial Instruments Indexed to, and Potentially Settled in, Entity's Own Stock, Equity

The Company has various convertible instruments outstanding more fully described in Note 7. Because the number of shares to be issued upon settlement cannot be determined under these instruments, the Company cannot determine whether it will have sufficient authorized shares at a given date to settle any other of its share-settleable instruments.

As a result, under ASC 815-15 “Derivatives and Hedging”, all other share-settleable instruments must be classified as liabilities.

 

Embedded Derivative Liabilities in Convertible Notes

 

During the year ended August 31, 2012, the Company recognized new derivative liabilities of $1,072,447 as a result of convertible debt issuances having embedded conversion options. The fair value of these derivative liabilities exceeded the principal balance of the related notes payable by $169,878, and was recorded as a loss on derivatives for the year ended August 31, 2012.

 

As a result of conversion of notes payable described in Note 7, the Company reclassified $1,172,084 of derivative liabilities to equity and the change in fair value of derivatives was $130,452.

 

As of August 31, 2012, the fair value of the Company’s derivative liabilities was $30,815 and $130,452 was recognized as a gain on derivatives due to change in fair value of the liabilities during the year ended August 31, 2012.

 

The following table summarizes the derivative liabilities included in the consolidated balance sheet:

 

  

Fair Value

Measurements Using Significant

Unobservable

Inputs (Level 3)

Derivative Liabilities:

  

 

 

Balance at August 31, 2011

  

$

ASC 815-15 additions

  

 

 1,072,447

Change in fair value

  

 

130,452

ASC 815-15 deletions

  

 

(1,172,084)

Balance at August 31, 2012

  

30,815

 

The following table summarizes the derivative gain or loss recorded as a result of the derivative liabilities above:

 

  

Included in Other Income (Expense) on Consolidated Statement of Operations

Gain/(Loss) on Derivative Liability:

  

 

 

Change in fair value of derivatives

  

$

130,452

Derivative expense

  

 

 (169,878)

Balance at August 31, 2012

  

 (39,426)

The fair values of derivative instruments were estimated using the Binomial pricing model based on the following weighted-average assumptions:

 

  

Convertible Debt Instruments

Risk-free rate

  

 

0.24% - 0.30% 

Expected volatility

  

 

100% - 300%

Expected life

  

 

 9 months – 12 months

 

Stockholders' Equity Note Disclosure

The Company is authorized to issue 500,000,000 shares of common stock, par value $0.001 per share and 10 million shares of preferred stock, par value $0.001.  No preferred shares have been issued.

.

During the year ended August 31, 2012, the Company issued Company stock as follows:

 

On September 2, 2011, the Company issued 26,087 shares of common stock for services rendered under consulting agreements.

 

On October 13, 2011, the Company issued 266,667, shares of common stock for services rendered under consulting agreements.

 

On November 8, 2011, the Company converted $50,000 of notes into 177,778 shares of common stock.

 

On November 17, 2011, the Company converted $50,000 of notes into 322,061 shares of common stock.

 

On November 29, 2011, the Company converted $60,000 of notes into 592,593 shares of common stock.

 

In December 2011, the Company converted $101,000 of notes into 1,216,508 shares of common stock.

 

In December 2011, the Company issued 2,415,459 shares of common stock for $250,000 of consulting fees.

 

In January 2012, the Company converted $243,870 of notes into 27,356,116 shares of common stock.

 

In February 2012, the Company converted $379,345 of notes into 1,823,741 shares of common stock.

 

In March 2012, the Company converted $95,619 of notes into 3,944,259 shares of common stock.

 

In April 2012, the Company converted $91,350 of notes into 1,135,714 shares of common stock.

 

In May 2012, the Company converted $75,924 of notes into 1,462,714 shares of common stock.

 

In June 2012, the Company converted $13,000 of notes into 293,785 shares of common stock.

 

In July 2012, the Company converted $53,000 of notes into 1,038,793 shares of common stock.

 

In August 2012, the Company converted $72,970 of notes into 2,143,097 shares of common stock.

 

The Company issued an additional 8,054,770 shares to Élan Health Services, Inc., pursuant to the original OTS acquisition agreement and closing whereby in the event that additional common shares were issued to other parties, then additional common shares would also be issued to maintain its ownership percentage of the then outstanding common shares at 60 percent. Though the Company agreed to return its stock in OTS to Healthcare of Today, Inc. in exchange for the return of the 5,217,000 shares of stock previously issued to Healthcare of Today, Inc., pursuant to the agreement to rescind the acquisition of OTS, the additional 8,054,770 shares that were issued were not returned and were considered to be issued and outstanding as of August 31, 2012. These shares have been recorded at fair market value and are included in payroll related expenses on the statement of operations and stock based compensation on the statement of cash flows for the year ended August 31, 2012.

 

As a result of these transactions, there were 30,094,500 common shares outstanding at August 31, 2012.

 

On July 1, 2011, the Company issued 333,333 shares of common stock valued at $2,100,000 to the Company’s Chairman and CEO, with the shares originally vesting over 5 years on a proportionate basis. As of August 31, 2011, one-fifth or 66,667 shares valued at $420,000 had vested. Mr. Gelmon conveyed two thirds of the original 333,333 shares to two other parties for reasons unrelated to the Company, retaining a total of 1,666,667 pre-split shares. The non-vested balance at August 31, 2011 of 266,666 total pre-split shares valued at $1,680,000 had been issued but were being held in escrow for release on an annual basis each July 1. During the year ended August 31, 2012, the Company revised the vesting term to 3 years and released an additional 2,333,333 pre-split shares (155,556 post split) valued at $980,000. The non-vested balance of at August 31, 2012 was one-third of the original issuance or 1,666,667 shares valued at $700,000, which is now 111,111 shares as a result of the 1:15 reverse split, of which Mr. Gelmon holds 37,037 shares to be received. In accordance with ASC 718, compensation cost related to shares issued is recognized over the vesting period with an off-setting credit to additional paid-in capital. Also, the deferred equity balance of $1,680,000 at August 31, 2011 was reclassified and netted against additional paid-in capital in the 2011 financial statements.