Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

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Stockholders' Equity
 9 Months Ended
Sep. 30, 2012
Stockholders' Equity [Abstract]  
Stockholders’ Equity
Note 9 - Stockholders’ Equity
 
Capital Stock
 
During the nine months ended September 30, 2012 the Company issued Three Million Three Hundred Thirty Three Thousand Three Hundred Thirty-Three (3,333,333) shares of the Company’s common stock, $0.001 par value per share (the “Common Stock) at a price of $0.15 for an aggregate purchase price of $500,000.  The shares were issued to Charles M. Piluso, Cliff Stein, John Coghlan and Jan Burman four directors and their affiliates and the proceeds were used for general working capital.
 
The Company has 260,000,000 shares of capital stock authorized, consisting of 250,000,000 shares of common stock, par value $0.001, 10,000,000 shares of Series A Preferred Stock, par value $0.001 per share.
 
Common Stock Options
 
2008 Equity Incentive Plan
 
In October 2008, the Company’s board of directors (the “Board”) adopted, the Euro Trend, Inc. 2008 Equity Incentive Plan (the “2008 Plan).  Under the 2008 Plan, we may grant options (including incentive stock options) to purchase our common stock or restricted stock awards to our employees, consultants or non-employee directors. The 2008 Plan is administered by the Board. Awards may be granted pursuant to the 2008 Plan for 10 years from the date the Board approved the 2008 Plan. Any grant under the 2008 Plan may be repriced, replaced or regranted at the discretion of the Board. From time to time, we may issue awards pursuant to the 2008 Plan.  
 
The material terms of options granted under the 2008 Plan (all of which have been nonqualified stock options) are consistent with the terms described in the footnotes to the "Outstanding Equity Awards at Fiscal Year-End December 31, 2011”, including 5 year graded vesting schedules and exercise prices equal to the fair market value of our common stock on the date of grant.  Stock grants made under the 2008 Plan have not been subject to vesting requirements. The 2008 Plan was terminated with respect to the issuance of new awards as of February 3, 2012.  There are 3,075,938 options outstanding under this plan as of September 30, 2012.
 
2010 Incentive Award Plan
 
The Company has reserved 2,000,000 shares of common stock for issuance under the terms of the Data Storage Corporation 2010 Incentive Award Plan (the “2010 Plan”). The 2010 Plan is intended to promote the interests of the Company by attracting and retaining exceptional employees, consultants, directors, officers and independent contractors (collectively referred to as the “Participants”), and enabling such Participants to participate in the long-term growth and financial success of the Company. Under the 2010 Plan, the Company may grant stock options, which are intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, stock appreciation rights and restricted stock awards, which are restricted shares of common stock (collectively referred to as “Incentive Awards”). Incentive Awards may be granted pursuant to the 2010 Plan for 10 years from the Effective Date.  From time to time, we may issue Incentive Awards pursuant to the 2010 Plan.  Each of the awards will be evidenced by and issued under a written agreement.  
 
On April 23, 2012, the Board of Directors of the Company amended and restated the Data Storage Corporation 2010 Plan. The 2010 Plan, as amended and restated, has been renamed the “Amended and Restated Data Storage Corporation Incentive Award Plan”.  The new plan provides for flexibility in vesting periods and includes a limit of $100,000 per employee per year for incentive stock options
 
There are 1,142,899 options outstanding under this plan as of September 30, 2012. There were 857,101 shares available for future grants under the plans.
 
A summary of the Company's option activity and related information follows:
 
   
Number of
Shares
Under Options
    
Range of
Option Price
Per Share
    
Weighted Average
Exercise Price
  
Options Outstanding at January 1, 2012
     2,563,115     $ 0.02 - 0.85     $ 0.28  
   Options Granted
     1,692,501       .34-.39       0.39  
   Options Exercised
     -       -       -  
   Options Expired
     (36,779 )       0.85       0.85  
Options Outstanding at September 30, 2012
     4,218,837     $ 0.02 - 0.85     $ 0.31  
                         
Options Exercisable at September 30, 2012
     2,741,638       0.02 - 0.85     $ 0.28  
 
Share-based compensation expense for options totaling $196,986 and $52,420 was recognized in our results for the nine months ended September 30, 2012 and 2011, respectively is based on awards vested. The 2012 options were valued at the grant date at $400,015 and are being amortized over five (5) years.
 
The valuation methodology used to determine the fair value of the options issued during the year was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options.
 
The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the Warrants and is calculated by using the average daily historical stock prices through the day preceding the grant date.
 
Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s estimated volatility is an average of the historical volatility of peer entities whose stock prices were publicly available. The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.
 
The weighted average fair value of options granted and the assumptions used in the Black-Scholes model during the nine months ended September 30, 2012 are set forth in the table below.
 
   
2012
    
2011
  
Weighted average fair value of options granted
  
$
0.35
    
$
0.41
  
Risk-free interest rate
    
1.59
%
    
2.20
%
Volatility
    
98.00
%
    
74.98
%
Expected life (years)
    
10
      
10
  
 
As of September 30, 2012, there was $400,264 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share based compensation plans that is expected to be recognized over a weighted average period of approximately 2.8 years.
 
Common Stock Warrants
 
There were no common stock warrants granted during the nine months ended September 30, 2012.
 
A summary of the Company's warrant activity and related information follows:
 
   
Number of
Shares
Under Warrants
    
Range of
Warrants Price Per Share
    
Weighted
Average
Exercise Price
  
Warrants Outstanding at January 1, 2012
    
173,427
    
$
0.01-0.02
    
$
0.01
  
   Warrants Granted
    
-
      
-
      
-
  
   Warrants Exercised
    
(144,785)
      
0.01
      
0.01
  
   Warrants Cancelled
    
                  -
      
                  -
      
                  -
  
Warrants Outstanding at September 30,2012
    
        28,642
      
            0.02
      
            0.02
  
                         
Warrants exercisable at September 30, 2012
    
28,642
      
0.02
      
0.02