Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

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Stockholders' Equity
 6 Months Ended
Jun. 30, 2011
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
Note 8 - Stockholders’ Equity
 
During the six months ended June 30, 2011 the company issue Three Million Six Hundred Forty Thousand Seven Hundred Seventy-Seven (3,640,777) shares of the Company’s common stock, $0.001 par value per share (the “Common Stock) at a price of $0.412 for an aggregate purchase price of $1,500,000.

During the six months ended June 30, 2011 the Company did not issue any common stock options. 
 
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, 2011
   
3,670,169
   
$
.02 - .36
   
$
0.137
 
   Options Granted
   
-
     
-
     
-
 
   Options Exercised
   
-
     
-
     
-
 
   Options Cancelled
   
-
     
-
     
-
 
Options Outstanding at June 30, 2011
   
3,670,169
     
.02 - .36
     
0.137
 
                         
 Options Exercisable at June 30, 2011
   
2,606,976
     
.02 - .36 
     
0.137
 
 
Share-based compensation expense for options totaling $31,959 and $6,964 was recognized in our results for the six months ended June 30, 2011and 2010, respectively is based on awards vested. The options were valued at the grant date at $366,014 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 year ended December 31, 2010 are set forth in the table below.
 
   
2010
 
Weighted average fair value of options granted
 
$
0.35
 
Risk-free interest rate
   
2.54 – 3.57
%
Volatility
   
77.45 – 117.62
%
Expected life (years)
   
10
 
Dividend yield
   
0.00
%
 
As of June 30, 2011, there was $240,322 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 4.0 years.

Common Stock Warrants
 
There were no common stock warrants granted during the six months ended June 30, 2011.
 
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, 2011
   
3,225,865
   
$
0.01 - 0.02
   
$
.01
 
   Warrants Granted
   
-
     
-
     
-
 
   Warrants Exercised
   
-
     
-
     
-
 
   Warrants Cancelled
   
-
     
-
     
-
 
Warrants Outstanding at June 30, 2011
   
3,225,865
     
0.01 – 0.02
     
.01
 
                         
Warrants exercisable at June 30, 2011
   
3,225,865
     
0.01 – 0.02
     
.01
 
 
The valuation methodology used to determine the fair value of the warrants issued during the year was the Black-Scholes option-pricing model, an acceptable model in accordance with FASB ASC 718-10-10 Share Based Payments. 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 warrants.

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 year ended December 31, 2010 is set forth in the table below.

   
2010
 
Weighted average fair value of options granted
 
$
.01
 
Risk-free interest rate
   
3.32
%
Volatility
   
85
%
Expected life (years)
   
10
 
Dividend yield
   
0.00
%