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v2.4.0.6
Stock Options and Warrants
12 Months Ended
Mar. 31, 2012
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note 9. Stock Options and Warrants

 

Stock Option Plans

 

On May 18, 2010, the Company’s shareholders adopted the 2010 Stock Option Plan (the “2010 Plan”), which allows for the issuance of up to 225,000 stock options to directors, executive officers, employees and consultants of the Company who are contributing to the Company’s success.

 

On January 10, 2012, the shareholders adopted the 2011 Stock Option Plan (the “2011 Plan”), which allows for the issuance of up to 800,000 stock options to directors, executive officers, employees and consultants of the Company who are contributing to the Company’s success. 

 

Year Ended March 31, 2011

 

In March 2011, the Company granted 10,000 stock options to a shareholder for consulting services at exercise prices ranging from $12.00 to $14.45 per share.  These options have a term of two years and vested immediately.  The options have a fair value of $78,091 which was recorded immediately to expense and was calculated using the Black-Scholes option-pricing model.  Variables used in the valuation include (1) discount rate of 0.80%, (2) expected life of two years, (3) expected volatility of 135.43% and (4) zero expected dividends.

 

In March 2011, the Company granted 15,000 stock warrants for consulting services with an exercise price of $5.00 per share.  These warrants have a term of five years and vested immediately.  The warrants have a fair value of $153,170 which was recorded immediately to expense and was calculated using the Black-Scholes option-pricing model.  Variables used in the valuation include (1) discount rate of 2.04%, (2) expected life of five years, (3) expected volatility of 153.47% and (4) zero expected dividends.

 

Year Ended March 31, 2012

 

In April and May 2011, the Company granted 30,000 stock options for consulting services at exercise prices ranging from $6.50 to $8.00.  These options have a term of two years and vested immediately.  The options have a fair value of $188,890 which was recorded immediately to expense and was calculated using the Black-Scholes option-pricing model.  Variables used in the valuation include (1) discount rates ranging from 0.56% to 0.65%, (2) expected life of two years, (3) expected volatility of 135% and (4) zero expected dividends.

 

In April and May 2011, the Company repriced 40,000 options that were previously issued to reduce the exercise prices ranging from $3.00 to $11.60.  The options were remeasured at the date of modification and an incremental stock-based compensation expense of $34,969 was recognized.

 

In February 2011, the Company entered into an agreement with a consultant. As part of the agreement, the Company issued 46,000 stock warrants representing 50% of a quarterly retainer to vest over three years.  The warrants are exercisable at $7.50 per share, have a term of five years and vest beginning May 1, 2011.  The warrants have a fair value of $333,966 which was calculated using the Black-Scholes option pricing model.  Variables used in the valuation include (1) discount rate of 1.97%, (2) expected life of five years, (3) expected volatility of 152.9% and (4) zero expected dividends.  Stock-based compensation expense recognized for these warrants amounted to $111,113 for the year ended March 31, 2012 and the unamortized expense as of March 31, 2012 amounted to $222,853.

 

In December 2011, the Company issued a warrant to purchase 500,000 shares of its common stock at $1.00 per share to the President of the Company. The warrant has a term of five years and vested immediately. The warrant has a fair value of $440,739 which was recorded immediately to expense and was calculated using the Black-Scholes option-pricing model.  Variables used in the valuation include (1) discount rates of 0.31% (2) expected life of 2.5 years, (3) expected volatility of 166.75% and (4) zero expected dividends. In May 2012, the warrant was cancelled effective December 2011 and replaced with an option to purchase 1,300,000 shares of the Company’s common stock at $0.10 per share, effective as of December 2011. The option has a term of five years and vests as follows: 50% vests immediately and 50% vests on January 1, 2013.

 

In November 2011, the Company issued 500,000 shares of its common stock as compensation to the VP of Operations. The Company valued the shares based on the then current market price of $2.00 per share for an aggregate of $1,000,000. Effective December 2011, as the Company did not present the certificate to the VP of Operations, the Company canceled the certificate and instead issued an option to purchase 1,000,000 shares of its common stock at $0.10 per share. The option has a term of five years and vests as follows: 50% vests immediately and 50% vests on January 1, 2013. The option has a fair value of $94,821 and was calculated using the Black-Scholes option-pricing model.  Variables used in the valuation include (1) discount rates of 2.21% (2) expected life of 5 years, (3) expected volatility of 171.82% and (4) zero expected dividends.

 

In March 2012, the Company entered into an Option Agreement (the “Agreement”) with an investment banking firm. Per the Agreement, the counterparty is to raise $2,500,000 of capital, net of any fees and costs related to the financing, for the Company on or before June 30, 2012. As inducement for performance, the Company granted an option to acquire 10% of the issued and outstanding common stock of the Company (based at the date of exercise) for an exercise price of $100,000. As the option vests conditional to performance by the counterparty, the Company will recognize the vesting of the option only upon the satisfaction of the performance conditions. As of June 29, 2012, the counterparty had not met the performance conditions and management does not believe that the performance conditions will be achieved before the expiration on June 30, 2012. Accordingly, the Company has recorded no fair value for these options as the probability of vesting is very remote.

  

The following table summarizes stock options issued and outstanding:

 

    Options     Weighted
average
exercise
price
    Aggregate
intrinsic
value
    Weighted
average
remaining
contractual
life (years)
 
                         
Outstanding at March 31, 2010     -     $ -     $ -       -  
Granted     10,000       13.60       150       2.00  
Exercised     -       -       -       -  
Forfeited or cancelled     -       -       -       -  
Expired     -       -       -       -  
Outstanding at March 31, 2011     10,000       13.60       150       2.00  
                                 
Granted     2,330,000       0.14       265,378       1.70  
Exercised     (40,000 )     5.64       162,497       0.71  
Forfeited or cancelled     -       -       -       -  
Expired     -       -       -       -  
Outstanding at March 31, 2012     2,300,000     $ 0.10     $ 218,088       4.25  

 

The following table summarizes warrants issued and outstanding:

 

    Warrants     Weighted
average
exercise
price
    Aggregate
intrinsic
value
    Weighted
average
remaining
contractual
life (years)
 
                         
Outstanding at March 31, 2010     -     $ -     $ -       -  
Granted     15,000       5.00       106,500       4.98  
Exercised     -       -       -       -  
Forfeited or cancelled     -       -       -       -  
Expired     -       -       -       -  
Outstanding at March 31, 2011     15,000       5.00       106,500       4.98  
                                 
Granted     546,000       1.55       774,705       4.42  
Exercised     -       -       -       -  
Forfeited or cancelled     (515,000 )     1.12       (547,239 )     2.23  
Expired     -       -       -       -  
Outstanding at March 31, 2012     46,000     $ 7.50     $ 333,966       4.10