From annual report;
Reason for the HUGE loss;
As of May 12, 2011, all outstanding 750,000 shares of Series A Preferred stock were converted by vote of the holders of a majority of those shares into approximately 95.1 million shares of common stock. Of these converted shares of common stock, approximately 55 million (58%) are held by affiliates, employees and control persons of the Company, and approximately 24 million more (25%) are subject to a two-year hold back from the date of issuance (which occurred between July 2010 and March 2011). In both cases, the resale of these common shares (83% of the total) is restricted, either pursuant to Rule 144 of the Securities Act of 1933 (“Rule 144”), or by additional contractual provisions. No additional consideration was paid by the shareholders and the Company did not offer any inducement in connection with this conversion.
Other Income (Expenses). For the year ended December 31, 2011, the Company recognized a non-cash loss attributable to an increase in derivative liabilities from warrants of ($35,089) and a non-cash loss from derivative liability convertibility feature of the Series A Preferred stock of ($19,771,086). Conversely, for the year ended December 31, 2010, the Company recognized non-cash income attributable to a decrease in derivative liabilities from warrants of $106,616 and non-cash income from Series A Preferred stock of $333,681. The Company converted and retired the Series A Preferred stock in May 2011, and therefore, will not incur derivative expenses or income from this source in the future. Derivative liabilities are calculated and are significantly affected by volatility of the Company’s stock price. In 2010 we also recognized a loss of $159,050 pursuant to converting debt into common stock.
