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10-K - FORM 10-K ANNUAL REPORT - HK BATTERY TECHNOLOGY INCannualreport_10k.htm
v2.4.0.6
CAPITAL STOCK
12 Months Ended
Dec. 31, 2011
CAPITAL STOCK  
CAPITAL STOCK

NOTE 7 – CAPITAL STOCK

 

Contribution of Capital

 

On February 17, 2010 a shareholder of the Company transferred 66,667 shares of the Company’s common stock from his personal account to an unrelated entity as a payment for investor relations and corporate communication services for the Company. The Company valued these shares at $0.75 per share based on the quoted market price of the shares, resulting in a total value of the shares transferred of $50,000.  Accordingly, the Company recorded a contribution of capital in the amount of $50,000 during the year ended December 31, 2010.

 

Private Placement Offering

 

On October 29, 2010 the Company consummated a private placement offering (“the offering”) whereby the Company issued 38,833,356 units at $0.10 per unit for total proceeds of $3,883,337.  The proceeds consisted of $3,450,000 in cash, conversions of $313,337 in convertible notes payable, and $120,000 as credit on certain of the Company’s trade payables.  Each unit consists of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock at $0.10 per share, exercisable for a period of five years from the date of closing.  The offering resulted in the Company undergoing a change in control, with Far East Golden Resources Investment Limited holding 30,000,000 of 43,694,054 (69%) post-offering common shares.  The offering warrants were valued using the Black Scholes model using the following assumptions: stock price at valuation, $0.36; strike price, $0.10; risk free rate 0.97%; 5 year average expected warrant term; and volatility of 113%. The Company attributed $2,969,195 of the offering proceeds associated with the transaction to the warrants based on the fair value of the warrants. The fair value of the warrants were accounted for as both an increase to additional paid in capital and as a decrease to additional paid in capital since the warrants were considered an incremental direct cost of raising capital.

 

In connection with the private placement offering transaction, the Company analyzed the contingent conversion features of the convertible notes and recorded interest expense totaling approximately $300,000 based on the intrinsic values of the convertible notes at the time of conversion and a market price of $0.36 per share.

 

Other Issuances

 

On November 18, 2010 the Company’s Board of Directors resolved to issue 150,000 shares of common stock to an independent third-party investor relations firm, as payment for services rendered during 2010. The Company valued these shares at $0.35 per share based on the quoted market price of the shares, resulting in a total value of the shares transferred of $52,500.  

 

Stock Option Awards

 

On November 5, 2009, the Company’s Board of Directors granted to David Rector, in connection with his appointment as the Company’s Chief Executive Officer, President, Secretary and director, incentive stock options to purchase 66,667 shares of Common Stock at a purchase price of $2.10 per share (the closing bid price quoted on the OTCBB on the date of grant), vesting 100% on December 31, 2010, and expiring November 4, 2014.

 

On November 16, 2009, the Company’s Board of Directors granted to John N. Braca, in connection with his appointment as a director, non-qualified stock options to purchase 16,667 shares of Common Stock at a purchase price of $1.95 per share (the closing bid price quoted on the OTCBB on the date of grant), vesting 100% on December 31, 2010, and expiring November 15, 2014.

 

On December 30, 2008, the Board of Directors of the Company adopted, and its stockholders approved, the 2008 Equity Incentive Plan (the “Plan”) which initially provided for incentive award grants of up to 266,667 shares of Common Stock.   However, in connection the Company’s 1-for-15 reverse stock split effected in September 2010, with stockholder approval, the Company amended the Plan to increase the total number of shares of Common Stock that may be granted pursuant to awards there under from 266,667 to 3,000,000, and to add a provision for automatic annual increases based on increases in the Company’s capitalization (the “Evergreen Clause”).

 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the table below. Expected volatilities are based on implied volatilities from, historical volatility of the Company’s stock, and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

 

  

  

2011

 

Expected volatility

  

  

294

%

Expected dividends

  

  

0

%

Expected term (in years)

  

  

1

  

Risk-free rate

  

  

0.12

%

 

A summary of option activity under the Plan as of December 31, 2011, and changes during the year then ended is presented below:

 

Options

  

Shares

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Remaining

Contractual

Term

 

 

Aggregate

Intrinsic

Value

  

Outstanding at January 1, 2011

  

  

83,333

  

  

$

2.001

  

  

  

3.9

  

  

$

-

  

Granted

  

  

-

  

  

  

-

  

  

  

-

  

  

  

-

  

Exercised

  

  

-

  

  

  

-

  

  

  

-

  

  

  

-

  

Forfeited or expired

  

  

-

  

  

  

-

  

  

  

-

  

  

  

-

  

Outstanding at December 31, 2011

  

  

83,333

  

  

$

2.001

  

  

  

3.9

  

  

-

  

Exercisable at December 31, 2011

  

  

83,333

  

  

$

2.001

  

  

  

3.9

  

  

-

  

 

The weighted-average grant-date fair value of options granted during the years ended December 31, 2011 and 2010 was both $0.

 

There was no change to the Company’s non-vested shares as of December 31, 2011 

 

Warrants

 

During the year, the transaction for $108,137 in common stock shares and warrants for payment of debt pursuant to a private placement offering were reversed.

 

A summary of warrant activity as of December 31, 2011, and changes during the year then ended is presented below:

 

Warrants

  

Shares

  

Outstanding at January 1, 2011

 

 

39,048,023

 

Granted

  

  

-

  

Exercised

  

  

-

  

Forfeited or expired

  

  

(1,081,370

Outstanding at December 31, 2011

  

  

37,966,653

  

Exercisable at December 31, 2011

  

  

37,966,653