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v2.4.0.6
EQUITY TRANSACTIONS
9 Months Ended
Sep. 30, 2012
Notes to Financial Statements  
Note 7 - EQUITY TRANSACTIONS

Common Stock:

 

The Company did not have any common stock activities during the nine months ended September 30, 2012 and 2011.

 

Stock Option:

 

In September 2009, the Company adopted the 2009 Stock Option Plan (“2009 Plan”). The 2009 Plan allows the Company to issue options to officers, directors and employees, as well as consultants, to purchase up to 7,000,000 shares of common stock.

 

During September 2009, the following options were granted:

 

· 1,000,000 options to the Company’s Chief Executive Officer, who is also a director of the Company.
· 1,150,000 options to three Directors of the Company
· 150,000 options to the Company’s Chief Financial Officer
· 400,000 options to three consultants to the Company

 

All the options granted have an exercise price of $0.80 per share and a 10 year life. With the exception of 50,000 options granted to a consultant that vested immediately, one third of the options granted vested at the date of grant, with the remainder vesting in equal parts in September 2012 and September 2015.

 

The Company recognized stock-based compensation expense of $207,579 related to these options during the nine-month periods ended September 30, 2012 and 2011.

 

On March 14, 2011, 100,000 options with an exercise price of $0.13 per share, a ten year life and immediate vesting were granted to two directors of the Company. The fair value of the options granted was $14,928, or $0.15 per share, and was calculated in accordance with the Black-Scholes valuation model based on the following assumptions: (a) risk free interest rate 3.36%, (b) expected volatility of 173.17% (c) expected life of 5 years, and (d) zero expected future dividends. These options vested immediately and $14,928 of share-based compensation was recognized during the six months ended June 30, 2011 related to this option grant.

 

On April 20, 2011, 800,000 options were granted to two directors, 150,000 options were granted to the Chief Financial Officer, and 150,000 options were granted to legal counsel of the Company. These options had an exercise price of $0.09 per share, a ten year life and vested immediately. The fair value of the options granted was $99,231, or $0.01 per share, and was calculated in accordance with the Black-Scholes valuation model based on the following assumptions: (a) risk free interest rate 3.43%, (b) expected volatility of 171.00% (c) expected life of 5 years, and (d) zero expected future dividends. These options vested immediately.

 

The options qualify as ‘plain vanilla’ under the accounting literature and therefore, the expected life has been calculated pursuant to the provisions of Staff Accounting Bulletin No. 107.

 

A summary of stock option activity for the nine months ended September 30, 2012 is presented below:

 

    Options     Weighted-Average Exercise Price     Aggregate Intrinsic Value  
Outstanding at January 1, 2012     3,900,000     $ 0.58     $ -  
Granted     -       -       -  
Exercised     -       -       -  
Expired     -       -       -  
Outstanding at September 30, 2012     3,900,000     $ 0.58     $ -  
Exercisable at September 30, 2012     3,016,667     $ 0.52     $ -  

 

The Company recognized total stock-based compensation expense of $207,579 related to these options during the quarter ended September 30, 2012. As of September 30, 2012, the total unrecognized stock-based compensation expense related to non-vested stock options was $830,321. The unrecognized stock-based compensation is expected to be ratably amortized to expense over a weighted average period of 2.96 years. The weighted average remaining contractual term of the outstanding options and exercisable options at September 30, 2012 is 7.46 years.

 

Stock Warrant:

 

There were no stock warrant activities during the nine months ended September 30, 2012 and 2011. As of September 30, 2012, there were no stock warrants outstanding.