Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2012 | Oct. 01, 2013 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | FALSE | |
Document Period End Date | 31-Mar-12 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2012 | |
Entity Registrant Name | CHASE PACKAGING CORP | |
Entity Central Index Key | 1025771 | |
Current Fiscal Year End Date | -19 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 15,536,275 |
Condensed_Balance_Sheets
Condensed Balance Sheets (USD $) | Mar. 31, 2012 | Dec. 31, 2011 |
ASSETS | ||
Cash and cash equivalents | $1,471,979 | $1,484,906 |
TOTAL ASSETS | 1,471,979 | 1,484,906 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 26,384 | 9,174 |
Warrant liability | 36,826 | 70,991 |
TOTAL CURRENT LIABILITIES | 63,210 | 80,165 |
COMMITMENTS AND CONTINGENCIES | ||
PREFERRED STOCK, $1.00 par value; 4,000,000 authorized: Series A 10% Convertible Preferred stock; 50,000 shares authorized; 20,637 and 20,637 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively: liquidation preference of $2,063,700 and $2,063,700 as of March 31, 2012 and December 31, 2011, respectively | 1,985,181 | 1,951,846 |
STOCKHOLDERS' DEFICIT | ||
Common stock, $.10 par value 200,000,000 shares authorized; 15,536,275 shares issued and outstanding as of March 31, 2012 and December 31, 2011 | 1,553,628 | 1,553,628 |
Additional paid-in capital | 2,559,145 | 2,559,145 |
Accumulated deficit | -3,626,121 | -3,626,121 |
Deficit accumulated during the development stage | -1,063,064 | -1,033,757 |
TOTAL STOCKHOLDERS' DEFICIT | -576,412 | -547,105 |
TOTAL LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' DEFICIT | $1,471,979 | $1,484,906 |
Condensed_Balance_Sheets_Paren
Condensed Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2012 | Dec. 31, 2011 |
Preferred Stock, Par or Stated Value Per Share | $1 | $1 |
Preferred Stock, Shares Authorized | 4,000,000 | 4,000,000 |
Common Stock, Par or Stated Value Per Share | $0.10 | $0.10 |
Common Stock, Shares Authorized | 200,000,000 | 200,000,000 |
Common Stock, Shares Issued | 15,536,275 | 15,536,275 |
Common Stock, Shares, Outstanding | 15,536,275 | 15,536,275 |
Series A 10% Preferred Stock | ||
Preferred Stock, Shares Authorized | 50,000 | 50,000 |
Preferred Stock, Shares Issued | 20,637 | 20,637 |
Preferred Stock, Shares Outstanding | 20,637 | 20,637 |
Preferred Stock, Liquidation Preference, Value | $2,063,700 | $2,063,700 |
Condensed_Statements_Of_Operat
Condensed Statements Of Operations (USD $) | 3 Months Ended | 159 Months Ended | |
Mar. 31, 2012 | Mar. 31, 2011 | Mar. 31, 2012 | |
CONDENSED STATEMENTS OF OPERATIONS | |||
NET SALES | $0 | $0 | $0 |
EXPENSES: | |||
General and administrative expense | 30,175 | 22,210 | 629,086 |
LOSS FROM OPERATIONS | -30,175 | -22,210 | -629,086 |
OTHER INCOME (EXPENSE) | |||
Interest expense | -8,591 | ||
Interest and other income | 38 | 198 | 59,921 |
Change in warrant liability | 34,165 | 28,956 | 104,202 |
TOTAL OTHER INCOME (EXPENSE) | 34,203 | 29,154 | 155,532 |
INCOME/(LOSS) BEFORE INCOME TAXES | 4,028 | 6,944 | -473,554 |
Provision for income taxes | 0 | 0 | 0 |
NET INCOME/(LOSS) | 4,028 | 6,944 | -473,554 |
Accretion of preferred stock to redemption value | -33,335 | -33,335 | -589,510 |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | ($29,307) | ($26,391) | ($1,063,064) |
BASIC AND DILUTED LOSS PER COMMON SHARE | |||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 15,536,275 | 15,536,275 |
Condensed_Statements_Of_Cash_F
Condensed Statements Of Cash Flows (USD $) | 3 Months Ended | 159 Months Ended | |
Mar. 31, 2012 | Mar. 31, 2011 | Mar. 31, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net income (loss) | $4,028 | $6,944 | ($473,554) |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Change in warrant liability | -34,165 | -28,956 | -104,202 |
Change in assets and liabilities | |||
Accounts payable and accrued expenses | 17,210 | 13,387 | 11,206 |
Net cash used in operating activities | -12,927 | -8,625 | -566,550 |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
CASH FLOWS FROM INVESTING ACTIVITIES | 0 | 0 | 0 |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Proceeds from convertible debt | 0 | 0 | 56,500 |
Proceeds from private placement/exercise of stock warrants | 0 | 0 | 5,500 |
Capital contribution | 0 | 0 | 8,000 |
Proceeds from private placement | 0 | 0 | 1,962,358 |
Cash dividends paid on preferred stock | 0 | 0 | -5,490 |
Net cash provided by financing activities | 0 | 0 | 2,026,868 |
NET INCREASE (DECREASE) IN CASH | -12,927 | -8,625 | 1,460,318 |
CASH, AT BEGINNING OF PERIOD | 1,484,906 | 1,581,989 | 11,661 |
CASH, AT END OF PERIOD | 1,471,979 | 1,573,364 | 1,471,979 |
SUPPLEMENTAL CASH FLOW INFORMATION | |||
Cash paid for: Interest | 0 | 0 | 0 |
Cash paid for: Income Taxes | 0 | 0 | 0 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: | |||
Accretion of preferred stock to redemption value | 33,335 | 33,335 | 589,510 |
Preferred stock issued as stock dividend | 0 | 0 | 6,820 |
416 Private Placement Units were issued in exchange for $56,500 of convertible notes plus $5,900 of accrued interest | 0 | 0 | 62,400 |
68 Private Placement Units were issued in exchange for $8,000 of stock subscriptions plus $2,200 of accrued interest | $0 | $0 | $10,200 |
Condensed_Statements_Of_Cash_F1
Condensed Statements Of Cash Flows (Parenthetical) (USD $) | 159 Months Ended |
Mar. 31, 2012 | |
CONDENSED STATEMENTS OF CASH FLOWS | |
Private Placement Units Issued | 416 |
Convertible Notes Payable | $56,500 |
Accrued interest on convertible notes payable | 5,900 |
Private Placement Units issued for stock subscriptions | 68 |
Stock subscriptions | 8,000 |
Accrued interest on stock subscriptions | $2,200 |
Basis_Of_Presentation
Basis Of Presentation | 3 Months Ended |
Mar. 31, 2012 | |
Basis of Presentation [Abstract] | |
BASIS OF PRESENTATION | NOTE 1 - BASIS OF PRESENTATION: |
Chase Packaging Corporation ("the Company"), a Texas Corporation, previously manufactured woven paper mesh for industrial applications, polypropylene mesh fabric bags for agricultural use, and distributed agricultural packaging manufactured by other companies. | |
Since January 1, 1999, the Board of Directors of the Company has been devoting its efforts to establishing a new business and, accordingly, the Company is being treated as a development stage company in accordance with Financial Accounting Standards Board's ("FASB") ASC 915. | |
Management's plans for the Company include securing a merger or acquisition, raising additional capital, and other strategies designed to optimize shareholder value. However, no assurance can be given that management will be successful in its efforts. The failure to achieve these plans will have a material adverse effect on the Company's financial position, results of operations, and ability to continue as a going concern. | |
The interim condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made are adequate to provide for fair presentation and a reasonable understanding of the information presented. The Interim Condensed Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-Q should be read in conjunction with the financial statements and the related notes, as well as Management's Discussion and Analysis of Financial Condition and Results of Operations, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, previously filed with the SEC. | |
In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of financial position as of March 31, 2012, results of operations for the three month periods ended March 31, 2012 and 2011, and cash flows for the three month periods ended March 31, 2012 and 2011, as applicable, have been made. The results of operations for the three month period ended March 31, 2012 are not necessarily indicative of the operating results for the full fiscal year or any future periods. | |
The accounting policies followed by the Company are set forth in Note 3 to the Company's financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2011, which is incorporated herein by reference. Specific reference is made to that report for a description of the Company's securities and the notes to financial statements. | |
Prior_Period_Adjustment
Prior Period Adjustment | 3 Months Ended | |||||||||||
Mar. 31, 2012 | ||||||||||||
Prior Period Adjustment [Abstract] | ||||||||||||
PRIOR PERIOD ADJUSTMENT | NOTE 2 - PRIOR PERIODS ADJUSTMENTS: | |||||||||||
The financial statements of the Company as of and for the three months ended March 31, 2011 and for the period from January 1, 1999 (inception) to March 31, 2011 have been restated as a result of management's determination that the Company had misclassified warrants and convertible preferred stock issued to investors in the private placement offering occurring on September 7, 2007. The warrants and convertible preferred stock were previously reported as equity. Upon further review of the terms of the respective private placement agreements, management concluded that the warrants should have been classified as a liability and the preferred stock should have been classified as mezzanine equity at inception. The warrants should be reported at fair value at the balance sheet date. The convertible preferred stock should be adjusted to its maximum redemption amount at each balance sheet date. | ||||||||||||
The restatement of these errors increased the Company's net loss attributable to common stockholders, as originally reported for the three months ended March 31, 2011 by $4,379 ($0.00 per basic and diluted share) to a loss of $26,391. The restated balances at January 1, 2011 also include a reduction of additional paid-in capital of $1,516,060, an increase in deficit accumulated during the development stage of $369,048, and an increase in warrant liabilities and the convertible preferred stock of $87,240 and $1,816,643, respectively. The restatement had no effect on the Company's cash and loss from operations or net cash used in operating activities for the three months ended March 31, 2011. After reviewing the circumstances leading up to the restatement, management believes that the errors were inadvertent and unintentional. In addition, following the discovery of these errors, the Company began implementing procedures intending to strengthen its internal control processes and prevent a recurrence of these errors. | ||||||||||||
The effects of the restatement on the Company's financial statements as of and for the three months ended March 31, 2011 and for the period from January 1, 1999 (inception) to March 31, 2011 are as follows: | ||||||||||||
- | ||||||||||||
BALANCE SHEET AS OF MARCH 31, 2011 | ||||||||||||
As Previously | Effect of | As restated | ||||||||||
Reported | Restatement | |||||||||||
Warrant liability | $ | - | $ | 58,284 | $ | 58,284 | ||||||
Redeemable and convertible preferred stock (under mezzanine) | $ | - | $ | 1,849,978 | $ | 1,849,978 | ||||||
Preferred Stock | $ | 18,775 | $ | -18,775 | $ | - | ||||||
Common stock | $ | 1,553,628 | $ | - | $ | 1,553,628 | ||||||
Additional paid-in capital | $ | 4,077,068 | $ | -1,516,060 | $ | 2,561,008 | ||||||
Accumulated deficit | $ | -3,626,121 | $ | - | $ | -3,626,121 | ||||||
Deficit accumulated during the development stage | $ | -464,761 | $ | -373,427 | $ | -838,188 | ||||||
Stockholders' equity (deficit) | $ | 1,558,589 | $ | -1,908,262 | $ | -349,673 | ||||||
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2011 | ||||||||||||
As Previously | Effect of | As restated | ||||||||||
Reported | Restatement | |||||||||||
Change in warrant liability expense | $ | - | $ | 28,956 | $ | 28,956 | ||||||
Net (loss) income for the period | $ | -22,012 | $ | 28,956 | $ | 6,944 | ||||||
Accretion of preferred stock to redemption value | $ | - | $ | -33,335 | $ | -33,335 | ||||||
Net loss attributable to common stockholders | $ | -22,012 | $ | -4,379 | $ | -26,391 | ||||||
Net loss per share – basic and diluted attributable to common stockholders | $ | - | $ | 0 | $ | 0 | ||||||
STATEMENT OF OPERATIONS FROM JANUARY 1, 1999 (INCEPTION) TO MARCH 31, 2011 | ||||||||||||
As Previously Reported | Effect of | As restated | ||||||||||
Restatement | ||||||||||||
Change in warrant liability expense | $ | - | $ | 82,743 | $ | 82,743 | ||||||
Net (loss) income for the period | $ | -464,761 | $ | 82,743 | $ | -382,018 | ||||||
Accretion of preferred stock to redemption value | $ | - | $ | -456,170 | $ | -456,170 | ||||||
Net loss attributable to common stockholders | $ | -464,761 | $ | -373,427 | $ | -838,188 | ||||||
STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2011 | ||||||||||||
As Previously | Effect of | As restated | ||||||||||
Reported | Restatement | |||||||||||
Net (loss) income | $ | -22,012 | $ | 28,956 | $ | 6,944 | ||||||
Change in warrant liability | $ | - | $ | -28,956 | $ | -28,956 | ||||||
Net cash used in operating activities | $ | -8,625 | $ | - | $ | -8,625 | ||||||
STATEMENT OF CASH FLOWS FROM JANUARY 1, 1999 (INCEPTION) TO MARCH 31, 2011 | ||||||||||||
As Previously | Effect of | As restated | ||||||||||
Reported | Restatement | |||||||||||
Net (loss) income | $ | -464,761 | $ | 82,743 | $ | -382,018 | ||||||
Change in warrant liability | $ | - | $ | -82,743 | $ | -82,743 | ||||||
Net cash used in operating activities | $ | -465,165 | $ | - | $ | -465,165 |
Basic_And_Diluted_Net_Loss_Per
Basic And Diluted Net Loss Per Common Share | 3 Months Ended |
Mar. 31, 2012 | |
Basic and Diluted Net Loss Per Common Share [Abstract] | |
BASIC AND DILUTED NET LOSS PER COMMON SHARE | NOTE 3 - BASIC AND DILUTED NET LOSS PER COMMON SHARE: |
Basic loss per common share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding. Diluted loss per share is computed by dividing the net loss by the sum of the weighted-average number of shares of common stock outstanding plus the dilutive effect of shares issuable through the exercise of common stock equivalents. | |
We have excluded 27,546,000 common stock equivalents (preferred stock and warrants) from the calculation of diluted loss per share for the three months ended March 31, 2012 and March 31, 2011, which, if included, would have an antidilutive effect. | |
Recent_Accounting_Pronouncemen
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2012 | |
Recent Accounting Pronouncements [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS: |
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. | |
Private_Placement_Offering
Private Placement Offering | 3 Months Ended | ||||||||
Mar. 31, 2012 | |||||||||
Private Placement Offering [Abstract] | |||||||||
PRIVATE PLACEMENT OFFERING | NOTE 5 - PRIVATE PLACEMENT OFFERING: | ||||||||
On September 7, 2007, the Company completed a private placement, pursuant to which 13,334 units (the "Units") were sold at a per Unit cash purchase price of $150, for a total subscribed amount of $2,000,100. Each Unit consists of: (1) one share of Series A 10% convertible preferred stock, par value $1.00, stated value $100 (the "Preferred Stock"); (2) 500 shares of the Company's common stock, par value $0.10 (the "Common Stock"); and (3) 500 warrants (the "Warrants") exercisable into Common Stock on a one-for-one basis. The proceeds of $2,000,100 were allocated to the instruments as follows: | |||||||||
Warrant liabilities | $ | 141,027 | |||||||
Redeemable and Convertible Preferred Stock | 1,388,367 | ||||||||
Common Stock | 470,706 | ||||||||
Total allocated gross proceeds: | $ | 2,000,100 | |||||||
Warrants | |||||||||
As of March 31, 2012 and 2011, warrants to purchase 6,909,000 shares were outstanding, having exercise prices at $0.15 and expiration date at September 6, 2012. | |||||||||
2012 | 2011 | ||||||||
Number of warrants | Weighted average exercise price | Number of warrants | Weighted average exercise price | ||||||
Balance at January 1 | 6,909,000 | $ | 0.15 | 6,909,000 | $ | 0.15 | |||
Issued during the period | - | $ | - | - | $ | - | |||
Exercised during the period | - | $ | - | - | $ | - | |||
Expired during the period | - | $ | - | - | $ | - | |||
Balance at March 31 | 6,909,000 | $ | 0.15 | 6,909,000 | $ | 0.15 | |||
As of March 31, 2012 and December 31, 2011, the average remaining contractual life of the outstanding warrants was 0.44 year and 0.69 years, respectively. | |||||||||
The warrants, which were issued to investors in the September 7, 2007, private placement offering, contained a provision for net cash settlement in the event that there was a fundamental transaction (contractually defined as a merger, sale of substantially all assets, tender offer, or share exchange). If a fundamental transaction occurred in which the consideration issued consisted principally of cash or stock in a non-public company, then the warrant holder had the option to receive cash, equal to the fair value of the remaining unexercised portion of the warrant. Due to this contingent redemption provision, the warrants required liability classification in accordance with ASC Topic 480, "Distinguishing Liabilities from Equity," ("ASC 480") and were recorded at fair value. In addition, these warrants were not indexed to the Company's stock, and therefore also required liability classification under ASC 815, "Derivatives and Hedging," (ASC 815). | |||||||||
ASC 820 provides requirements for disclosure of liabilities that are measured at fair value on a recurring basis in periods subsequent to the initial recognition. Fair values for warrants are determined using the Binomial Lattice valuation technique. The Binomial Lattice valuation model provides for dynamic assumptions regarding volatility and risk-free interest rates within the total period to maturity. Accordingly, within the contractual term, the Company provided multiple date intervals over which multiple volatilities and risk free interest rates were used. These intervals allow the Binomial Lattice valuation model to project outcomes along specific paths which consider volatilities and risk free rates that would be more likely in an early exercise scenario. | |||||||||
Significant assumptions are determined as follows: | |||||||||
Trading market values—Published trading market values; | |||||||||
Exercise price—Stated exercise price; | |||||||||
Term—Remaining contractual term of the warrant; | |||||||||
Volatility—Historical trading volatility for periods consistent with the remaining terms; | |||||||||
Risk-free rate—Yields on zero coupon government securities with remaining terms consistent with the remaining terms of the warrants. | |||||||||
Due to the fundamental transaction provision, which could provide for early redemption of the warrants, the model also considered the probability the Company would enter into a fundamental transaction during the remaining term of the warrant. Since the Company is still in its development stage and is not yet achieving positive cash flow, management believes the probability of a fundamental transaction occurring over the term of the warrant is approximately ranging from 0.75% to1.00%. For valuation purposes, the Company also assumed that if such a transaction did occur, it was more likely to occur towards the end of the term of the warrants. | |||||||||
The warrants issued are not only subject to traditional anti-dilution protection, such as stock splits and dividends, but they were also subject to down-round anti-dilution protection. Accordingly, if the Company sold common stock or common stock indexed financial instruments below the stated exercise price, the exercise price related to these warrants would adjust to that lower amount. The Lattice model used to value the warrants with down-round anti-dilution protection provided for multiple, probability-weighted scenarios at the stated exercise price and at five additional decrements/scenarios on each valuation date in order to encompass the value of the anti-dilution provisions in the estimate of fair value of the warrants, Calculations were performed at the stated exercise price and at five additional decrements/scenarios on each valuation date. The calculations provide for multiple, probability-weighted scenarios reflecting decrements that result from declines in the market prices. Decrements are predicated on the trading market prices in decreasing ranges below the contractual exercise price. For each valuation date, multiple Binomial Lattice calculations were performed which were probability weighted by considering both the Company's (i) historical market pricing trends, and (ii) an outlook for whether or not the Company may need to issue equity or equity-indexed instruments in the future with a price less than the current exercise price. | |||||||||
The following table summarizes the fair value of the warrants as of the balance sheet date: | |||||||||
Fair values | March 31, | December 31, | At transaction date | ||||||
2012 | 2011 | ||||||||
September 7, 2007 financing | $ | 36,826 | $ | 70,991 | $ | 141,027 | |||
Warrants issued to the placement agents in the private placement are included with the warrants to investors as they have identical exercise prices and terms | |||||||||
As of March 31, 2012 and December 31, 2011, the number of shares indexed to the warrants as was 6,909,000 and 6,909,000, respectively | |||||||||
The following are the assumptions for the valuation of the fair value of the warrant liability: | |||||||||
March 31, | December 31, | At transaction date | |||||||
2012 | 2011 | ||||||||
Warrants outstanding | 6,909,000 | 6,909,000 | 6,909,000 | ||||||
Exercise price | $0.15 | $0.15 | $0.15 | ||||||
Annual dividend yield | 0.03% | 0.03% | 4.01% | ||||||
Expected life (years) | 0.44 | 0.69 | 5 | ||||||
Risk-free interest rate | 0.12% | 0.12% | 4.14% | ||||||
Expected volatility | 69% | 77% | 53.94% | ||||||
Effective June 30, 2012, the Company entered into an amendment to its Warrant Agreement. The amendment to remove the put and the down round protection feature allows for the Warrants to be treated as equity beginning with the quarter ended June 30, 2012. The fair values of the warrants were $36,826 and $70,991 as of March 31, 2012 and December 31, 2011, respectively and were recorded under current liabilities. | |||||||||
Series A 10% Convertible Preferred Stock | |||||||||
The principal terms of the Series A 10% Convertible Preferred Stock were as follows: | |||||||||
Voting rights – The Series A 10% Convertible Preferred Stock has voting rights (one vote per share) equal to those of the Company's common stock. | |||||||||
Dividend rights – The Series A 10% Convertible Preferred Stock carries a fixed cumulative dividend, as and when declared by our Board of Directors, of 10% per annum, accrued daily, compounded annually and payable in cash upon a liquidation event for up to five years, as well as the right to receive any dividends paid to holders of common stock. | |||||||||
Conversion rights – The holders of the Series A 10% Convertible Preferred Stock have the right to convert any or all of their Series A 10% Convertible Preferred Stock, at the option of the holder, at any time, into common stock on a one for one thousand basis. | |||||||||
Redemption rights –The shares of the Series A 10% Convertible Preferred Stock may be redeemed by the Company, in whole or in part, at the option of the Company, upon written notice by the Company to the holders of Series A 10% Convertible Preferred Stock at any time in the event that the Preferred Stock of one or more holders has not been previously converted. The Company shall redeem each share of Preferred Stock of such holders within thirty (30) days of the Company's delivery of notice to such holders and such holders shall surrender the certificate(s) representing such shares of Preferred Stock. | |||||||||
Liquidation entitlement – In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series A 10% Convertible Preferred Stock shall be entitled to receive, in preference to the holders of common stock, an amount equal to $100 per share of Series A 10% Convertible Preferred Stock plus all accrued and unpaid dividends. | |||||||||
At any time on or after August 2, 2011, the Holders of 66 2/3% or more of the Preferred Stock then outstanding could have requested liquidation of their Preferred Stock. In the event that, at the time of such requested liquidation, the Company's cash funds (in excess of a $50,000 reserve fund) then available to effect such requested liquidation were inadequate for such purpose, then such requested liquidation should have taken place (on a ratable basis) only to the extent such excess cash funds were available for such purpose. | |||||||||
Other provisions – There will be proportional adjustments for stock splits, stock dividends, recapitalizations and the like. | |||||||||
The Company had classified the Series A 10% Convertible Preferred Stock as temporary equity because it was redeemable upon the occurrence of an event that is not solely within the control of the issuer. | |||||||||
Dividends
Dividends | 3 Months Ended |
Mar. 31, 2012 | |
Dividends [Abstract] | |
DIVIDENDS | NOTE 6 - DIVIDENDS: |
On November 1, 2010, the Company announced that the Board of Directors had declared a ten percent stock dividend on its outstanding Series A 10% Convertible Preferred Stock. Stockholders of record as of November 15, 2010 received the stock dividend for each share of Series A Preferred Stock owned on that date, payable December 1, 2010. As of November 1, 2010, the Company had 17,078 shares of Preferred Stock outstanding; the total dividend paid consisted of 1,697 shares of Series A Preferred Stock with a fair value of $169,700 and $1,180 cash in lieu of fractional shares. Due to the absence of Retained Earnings, the $1,180 of cash and $1,697 par value of Preferred Stock dividend totaling $2,877 was charged against Additional Paid-in Capital. | |
On November 1, 2011, the Company announced that the Board of Directors had declared a ten percent stock dividend on its outstanding Series A 10% Convertible Preferred Stock. Stockholders of record as of November 15, 2011 received the stock dividend for each share of Series A Preferred Stock owned on that date, payable December 1, 2011. As of November 1, 2011, the Company had 18,774 shares of Preferred Stock outstanding; the total dividend paid consisted of 1,863 shares of Series A Preferred Stock (which are convertible into 1,863,000 shares of Common Stock) with a fair value of $186,300 and a total of 14 fractional shares which will be accumulated until whole shares can be issued. Due to the absence of Retained Earnings, the $1,863 par value of Preferred Stock dividend was charged against Additional Paid-in Capital. | |
Stockholders_Deficit
Stockholders' Deficit | 3 Months Ended |
Mar. 31, 2012 | |
Stockholders' Deficit [Abstract] | |
STOCKHOLDERS' DEFICIT | NOTE 7 - STOCKHOLDERS' DEFICIT: |
The Company's 2008 Stock Awards Plan was approved April 9, 2008 by the Board of Directors and ratified at the Company's annual meeting of stockholders held on June 3, 2008. The 2008 Plan became effective April 9, 2008 and will terminate on April 8, 2018. Subject to certain adjustments, the number of shares of Common Stock that may be issued pursuant to awards under the 2008 Plan is 2,000,000 shares. A maximum of 80,000 shares may be granted in any one year in any form to any one participant, of which a maximum of (i) 50,000 shares may be granted to a participant in the form of stock options and (ii) 30,000 shares may be granted to a participant in the form of Common Stock or restricted stock. The 2008 Plan will be administered by a committee of the Board of Directors. Employees, including any employee who is also a director or an officer, consultants, and outside directors of the Company are eligible to participate in the 2008 Plan. As of March 31, 2012, no equity had been issued under the 2008 Plan. | |
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended | |||||||||||||||||||||
Mar. 31, 2012 | ||||||||||||||||||||||
Fair Value Measurements [Abstract] | ||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | NOTE 8 - FAIR VALUE MEASUREMENTS: | |||||||||||||||||||||
ASC 820, "Fair Value Measurements and Disclosure," ("ASC 820") defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, not adjusted for transaction costs. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). | ||||||||||||||||||||||
The three levels are described below: | ||||||||||||||||||||||
Level 1 Inputs — Unadjusted quoted prices in active markets for identical assets or liabilities that is accessible by the Company; | ||||||||||||||||||||||
Level 2 Inputs — Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; | ||||||||||||||||||||||
Level 3 Inputs — Unobservable inputs for the asset or liability including significant assumptions of the Company and other market participants. | ||||||||||||||||||||||
There were no transfers in or out of any level during the three months ended March 31, 2012 and the year ended December 31, 2011. | ||||||||||||||||||||||
Except for those assets and liabilities which are required by authoritative accounting guidance to be recorded at fair value in the Company's balance sheets, the Company has elected not to record any other assets or liabilities at fair value, as permitted by ASC 820. No events occurred during the quarter ended March 31, 2012 which would require adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis. | ||||||||||||||||||||||
The Company determines fair values for its investment assets as follows: | ||||||||||||||||||||||
Cash equivalents at fair value — the Company's cash equivalents, at fair value, consist of money market funds — marked to market. The Company's money market funds are classified within Level 1 of the fair value hierarchy since they are valued using quoted market prices from an exchange. | ||||||||||||||||||||||
Warrant liability — the Company's warrant liability is classified within Level 3 of the fair value hierarchy and the value of the warrants are re-measured every quarter and each year using the Binomial Lattice valuation model with the assumptions as stated in note 5. | ||||||||||||||||||||||
The following tables provide information on those assets and liabilities measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011, respectively: | ||||||||||||||||||||||
Carrying Amount In Balance Sheet | Fair Value | Fair Value Measurement Using | ||||||||||||||||||||
31-Mar-12 | 31-Mar-12 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
Assets: | ||||||||||||||||||||||
Money Market Funds | $ | 1,472,000 | $ | 1,472,000 | $ | 1,472,000 | $ | — | $ | — | ||||||||||||
Liabilities: | ||||||||||||||||||||||
Warrant Liability | $ | 37,000 | $ | 37,000 | $ | — | $ | — | $ | 37,000 | ||||||||||||
Carrying Amount In Balance Sheet | Fair Value | Fair Value Measurement Using | ||||||||||||||||||||
December 31 2011 | December 31 2011 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
Assets: | ||||||||||||||||||||||
Money Market Funds | $ | 645,000 | $ | 645,000 | $ | 645,000 | $ | — | $ | — | ||||||||||||
Treasury Bills | $ | 840,000 | $ | 840,000 | $ | 840,000 | $ | — | $ | — | ||||||||||||
Total Assets: | $ | 1,485,000 | $ | 1,485,000 | $ | 1,485,000 | $ | — | $ | — | ||||||||||||
Liabilities: | ||||||||||||||||||||||
Warrant liability | $ | 71,000 | $ | 71,000 | $ | — | $ | — | $ | 71,000 | ||||||||||||
Level 3 Derivative Assets and Liabilities at Fair Value for the Quarter Ended March 31, 2012 | ||||||||||||||||||||||
Balance, | Net | Net unrealized | Purchases | Sales | Modification on warrants to change to equity | Transfers | Transfers | Balance, | ||||||||||||||
beginning | realized | gains/(losses) | into | out of | end of | |||||||||||||||||
of period | gains/ | relating to | level 3 | level 3 | period | |||||||||||||||||
(losses) | instruments | |||||||||||||||||||||
still held at | ||||||||||||||||||||||
period-end | ||||||||||||||||||||||
$71,000 | - | $34,000 | - | - | - | - | - | $37,000 | ||||||||||||||
Level 3 Derivative Assets and Liabilities at Fair Value for the Year Ended December 31, 2011 | ||||||||||||||||||||||
Balance, | Net | Net unrealized | Purchases | Sales | Modification on warrants to change to equity | Transfers | Transfers | Balance, | ||||||||||||||
beginning | realized | gains/(losses) | into | out of | end of | |||||||||||||||||
of year | gains/ | relating to | level 3 | level 3 | year | |||||||||||||||||
(losses) | instruments | |||||||||||||||||||||
still held at | ||||||||||||||||||||||
year-end | ||||||||||||||||||||||
$87,000 | - | $16,000 | - | - | - | - | - | $71,000 | ||||||||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2012 | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 9 - COMMITMENTS AND CONTINGENCIES: |
The Company's Board of Directors has agreed to pay the Company's Chief Financial Officer an annual salary of $17,000. No other officers or directors of the Company receive compensation other than reimbursement of out-of-pocket expenses incurred in connection with Company business and development. | |
Subsequent_Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2012 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 10 - SUBSEQUENT EVENTS: |
Amendments made to the Preferred Stock and Warrant Agreements. | |
After review of the Section 5(b) of the original Series A 10% Convertible Preferred Stock and Section 9(c) and Section 9(d) of the original Warrant Agreement of the Preferred Stock and Warrant Agreement, and the resulting accounting consequence as mentioned in note 2, the Company decided to amend the respective agreements to delete these sections. The Company explained to the holders of these instruments that these were unintended consequences, and the holders of the instruments were not materially disadvantaged due to these amendments. | |