Indicate by check mark whether the registrant is a large
accelerated file, an accelerated file, a non-accelerated file, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Item 4. Description of Securities.
Our authorized capital stock consists
of 500,000,000 shares of common stock, with a par value of $0.001 per share, and 10,000,000 shares of preferred stock, with a par
value of $0.001 per share. As of March 31, 2013, there were 14,232,496 shares of our common stock issued and outstanding and 65
shares of our preferred stock issued and outstanding.
Common Stock
Our common stock is entitled to one vote
per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required
by law or provided in any resolution adopted by our board of directors with respect to any series of preferred stock, the holders
of our common stock will possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a
majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our common
stock that are present in person or represented by proxy, subject to any voting rights granted to holders of any preferred stock.
Holders of our common stock representing fifty percent (50%) of our capital stock issued, outstanding and entitled to vote, represented
in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority
of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment
to our Articles of Incorporation. Our Articles of Incorporation do not provide for cumulative voting in the election of directors.
Subject to any preferential rights of
any outstanding series of preferred stock created by our board of directors from time to time, the holders of shares of our common
stock will be entitled to such cash dividends as may be declared from time to time by our board of directors from funds available
therefore.
Subject to any preferential rights of
any outstanding series of preferred stock created from time to time by our board of directors, upon liquidation, dissolution or
winding up, the holders of shares of our common stock will be entitled to receive pro rata all assets available for distribution
to such holders.
In the event of any merger or consolidation
with or into another company in connection with which shares of our common stock are converted into or exchangeable for shares
of stock, other securities or property (including cash), all holders of our common stock will be entitled to receive the same kind
and amount of shares of stock and other securities and property (including cash). Holders of our common stock have no pre-emptive
rights, no conversion rights and there are no redemption provisions applicable to our common stock.
Preferred Stock
Our board of directors is authorized
by our articles of incorporation to divide the authorized shares of our preferred stock into one or more series, each of which
must be so designated as to distinguish the shares of each series of preferred stock from the shares of all other series and classes.
Our board of directors is authorized, within any limitations prescribed by law and our articles of incorporation, to fix and determine
the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of preferred stock including,
but not limited to, the following:
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1.
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The number of shares constituting that series and the distinctive designation of that series,
which may be by distinguishing number, letter or title;
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2.
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The dividend rate on the shares of that series, whether dividends will be cumulative, and if
so, from which date(s), and the relative rights of priority, if any, of payment of dividends on shares of that series;
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3.
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Whether that series will have voting rights, in addition to the voting rights provided by law,
and, if so, the terms of such voting rights;
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4.
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Whether that series will have conversion privileges, and, if so, the terms and conditions of
such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors determines;
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5.
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Whether or not the shares of that series will be redeemable, and, if so, the terms and conditions
of such redemption, including the date or date upon or after which they are redeemable, and the amount per share payable in case
of redemption, which amount may vary under different conditions and at different redemption dates;
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6.
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Whether that series will have a sinking fund for the redemption or purchase of shares of that
series, and, if so, the terms and amount of such sinking fund;
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7.
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The rights of the shares of that series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series;
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8.
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Any other relative rights, preferences and limitations of that series
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Series A Preferred
During the year ended December 31, 2008,
35 preferred shares were issued for $3,500,000. Issuance costs totaled $515,000 resulting in net proceeds of $2,985,000. The 35
shares are convertible to 3,500,000 shares of common stock and bear a 10% cumulative dividend. In addition, there was a warrant
issued to purchase 6,000,000 shares of common stock at an exercise price of $2 for a period of seven years.
The holders of the preferred stock are
entitled to semi-annual dividends payable on the stated value of the Series A preferred stock at a rate of 10% per annum, which
shall be cumulative, and accrue daily from the issuance date. The dividends may be paid in cash or shares of the Company's common
stock at management’s discretion. If after the conversion eligibility date, the market price for the common stock for any
ten consecutive trading days in which the stock trades for over $2 per share and trading exceeds 100,000 shares per day, the preferred
shareholders can be required to convert their shares to common stock. Each share of Series A preferred stock shall also be convertible
at the option of the holder into that number of shares of common stock of the Company at the stated value of such share at a $1
conversion price.
The holder may cause this conversion
at the time the shares are eligible for resale by the holder. The conversion price is subject to adjustment as hereinafter provided,
at any time, or from time to time upon the terms and in the manner hereinafter set forth in the shareholder agreement. There is
no conversion expiration date, however, the holder must provide 30 days notice for the registration of the conversion.
On May 12, 2010, the Company’s
Board declared and issued 236,598 common shares as payment for all cumulative and current semi-annual dividends. On November 16,
2010, the Company’s Board declared and issued 173,922 common shares for its semi-annual dividend payment. On March 25, 2011,
the Company’s Board declared and issued 176,768 common shares for its semi-annual dividend payment. On September 21, 2011,
the Company's Board declared and issued 156,306 common shares for its semi-annual dividend payment. The Company has undeclared
dividends that were due in February and September 2012 totaling $350,000 as of December 31, 2012 and undeclared dividends of $175,000
due in February 2013.
Series B Preferred
During the year ended December 31, 2010,
15 preferred shares were issued for $1,500,000. The 15 shares are convertible to 1,500,000 shares of common stock and bear a 10%
cumulative dividend. In addition, there was a warrant issued to purchase 3,000,000 shares of common stock at an exercise price
of $3 for a period of seven years.
The preferred stock was issued for $1,500,000 less associated
issuance costs of $350,000 for net proceeds of $1,150,000. Additionally, 3,000,000 common stock warrants were issued with the preferred
stock. Based on the fair values of the preferred stock and common stock warrants on the issue date, $341,100 was allocated to preferred
stock and $1,158,900 was allocated to the common stock warrants. Equity issuance costs of $350,000 were allocated to the preferred
stock.
During the quarter ended September 30,
2011, 15 preferred shares were issued to an investor for $1,500,000. The 15 shares are convertible to 1,500,000 shares of common
stock and bear a 10% cumulative dividend. In addition, there was a warrant issued to purchase 1,000,000 shares of common stock
at an exercise price of $3 for a period of seven years. Based on the fair values of the preferred stock and common stock warrants
on the issue date, $855,460 was allocated to preferred stock and $644,540 was allocated to the common stock warrants.
The holders of the preferred stock are
entitled to semi-annual dividends payable on the stated value of the Series B preferred stock at a rate of 10% per annum, which
shall be cumulative, and accrue daily from the issuance date. The dividends may be paid in cash or shares of the Company's common
stock at management’s discretion. If after the conversion eligibility date, the market price for the common stock for any
ten consecutive trading days in which the stock trades for over $2 per share and trading exceeds 100,000 shares per day, the preferred
shareholders can be required to convert their shares to common stock. Each share of Series B preferred stock shall also be convertible
at the option of the holder into that number of shares of common stock of the Company at the stated value of such share at a $1.50
conversion price.
The holder may cause this conversion
at the time the shares are eligible for resale by the holder. The conversion price is subject to adjustment as hereinafter provided,
at any time, or from time to time upon the terms and in the manner hereinafter set forth in the shareholder agreement. On March
25, 2011, the Company’s Board declared and issued 75,758 common shares for its semi-annual dividend payment. On September
21, 2011, the Company's Board declared and issued 66,988 common shares for its semi-annual dividend payment. The Company has undeclared
dividends that were due in February and September 2012 totaling $150,000 as of December 31, 2012 and undeclared dividends of $75,000
due in February 2013.
Provisions in Our Articles of Incorporation and By-Laws
That Would Delay, Defer or Prevent a Change in Control
Our articles of incorporation authorize
our board of directors to issue a class of preferred stock commonly known as a "blank check" preferred stock. Specifically,
the preferred stock may be issued from time to time by the board of directors as shares of one (1) or more classes or series. Our
board of directors, subject to the provisions of our Articles of Incorporation and limitations imposed by law, is authorized to
adopt resolutions; to issue the shares; to fix the number of shares; to change the number of shares constituting any series; and
to provide for or change the following: the voting powers; designations; preferences; and relative, participating, optional or
other special rights, qualifications, limitations or restrictions, including the following: dividend rights, including whether
dividends are cumulative; dividend rates; terms of redemption, including sinking fund provisions; redemption prices; conversion
rights and liquidation preferences of the shares constituting any class or series of the preferred stock.
In each such case, we will not need any
further action or vote by our shareholders. One of the effects of undesignated preferred stock may be to enable the board of directors
to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of our management. The issuance of shares of preferred stock pursuant to the
board of director's authority described above may adversely affect the rights of holders of common stock. For example, preferred
stock issued by us may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited
voting rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage
bids for the common stock at a premium or may otherwise adversely affect the market price of the common stock.
Item 5. Interests of Named Experts and
Counsel.
No expert or counsel named in this prospectus
as having prepared or certified any part of it or as having given an opinion upon the validity of the securities being registered
or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis,
or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the Company or any of
its parents or subsidiaries. Nor was any such person connected with the Company or any of its parents or subsidiaries as a promoter,
managing or principal underwriter, voting trustee, director, officer, or employee.
Item 6. Indemnification of Directors
and Officers.
Our officers and directors are indemnified
as provided by the Nevada Revised Statutes and our articles of incorporation and our bylaws.
Pursuant to our articles of incorporation
and our bylaws, we may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, (other than an action by or
in the right of us) by reason of the fact that he is or was a director, officer, employee, fiduciary or agent of the company or
is or was serving at the request of us as a director, officer, employee, fiduciary or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses (including attorney fees), judgments, fines, and amounts paid in settlement
actually and reasonably believed to be in our best interests and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, or
conviction or upon a pleas of nolo contenders or its equivalent shall not of itself create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in our best interests and, with respect to any criminal action
or proceeding, had reasonable cause to believe his conduct was unlawful.
Our articles of incorporation and bylaws
also provide that we may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending,
or completed action or suit by or in the right of our company or procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee, or agent of our company or is or was serving at our request as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorney
fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in our best interests: but no indemnification shall be made in respect
to any claim, issue, or matter as to which such person has been adjudged to be liable for negligence or misconduct in the performance
of his duty to us unless and only to the extent that the court in which such action or suit was brought determines upon application
that, despite the adjudication of liability, but in view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnification for such expenses which such court deems proper.
To the extent that a director, officer,
employee, fiduciary or agent of a corporation has been successful on the merits in defense of any action, suit, or proceeding referred
to in the preceding two paragraphs or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses
(including attorney fees) actually and reasonably incurred by him in connection therewith.
The indemnification provided by the provisions
described in this section shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled
under our articles of incorporation, the bylaws, agreements, vote of the shareholders or disinterested directors, or otherwise,
both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs and personal
representatives of such a person.
Item 7. Exemption from Registration
Claimed.
Not applicable.
Item 8. Exhibits.
(1)
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Incorporated by reference to the Registration Statement on Form S-1 filed with the SEC on November 12, 2008.
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(2)
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Incorporated by reference to the Form 8-K filed with the SEC on July 16, 2010.
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(3)
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Incorporated by reference to the Form 8-K filed with the SEC on June 11, 2010.
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*
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Filed herewith
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Item 9. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which
offers or sales are being made, a post-effective amendment to this registration statement to:
(i) include any Prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) reflect in the Prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be
reflected in the form of Prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation
of Registration Fee” table in the effective registration statement; and
(iii) include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration
statement;
(2) That, for the purpose of determining
any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means
of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) For purposes of determining liability
under the Securities Act of 1933 to any purchaser:
(i) If the Registrant is subject to Rule 430C, each Prospectus
filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying
on Rule 430B or other than Prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or Prospectus that is part of the registration or made in a document incorporated or deemed incorporated by reference into the
registration statement or Prospectus that is part of the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that was made in the registration statement or Prospectus that
was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That for the purpose of determining
liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes
that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means
of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser:
(i) Any preliminary Prospectus or Prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing Prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing Prospectus relating
to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of
the undersigned registrant; and
(iv) Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant
to the provisions described under Item 24 above, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.