COMMON STOCK WARRANTS

v2.4.0.6

COMMON STOCK WARRANTS	12 Months Ended
	Sep. 30, 2012
Common Stock Warrants
COMMON STOCK WARRANTS	NOTE 7 – COMMON STOCK WARRANTS   For all warrants included within permanent equity, the Company has determined the estimated value of the warrants granted to non-employees in exchange for services and financing expenses using the Black-Scholes pricing model and the following assumptions: stock price at valuation, $0.21-$0.84; expected term of 3-5 years, exercise price of $0.50-$1.20, a risk free interest rate of 0.21-2.90 percent, a dividend yield of 0 percent and volatility of 114-276 percent. All warrants accounted for as a derivative liability have been valued using a Lattice Model as described in Note 5.    In connection with the January 15, 2010 financing, the Company issued 5,583,336 Class H warrants to the Series F warrant holders who exercised their Series F warrants. The Class H Warrants have a 5 year term with a strike price of $0.55. These warrants were originally determined to be a derivative liability but as of January 15, 2012, have been reclassified to permanent equity (see Note 5).   On April 9, 2010 the Company granted 10,000 warrants as payment for an outstanding accounts payable balance of $3,991.   On June 22, 2010 the Company authorized the issuance of 93,000 warrants for services to the Company.  Of these authorized warrants, 90,000 were issued on June 23, 2010 once the contract for services was finalized. These warrants have a 5 year term with a strike price of $0.50. The remaining 3,000 warrants were issued September 2, 2010. These warrants have a three year term with a strike price of $0.50.  The combined value of these warrants was $41,129 at the time of issuance and the value was expensed as research and development expense.   In connection with the December 30, 2010 financing, the investors received 2,520,000 Class I five year warrants to purchase common stock at an exercise price of $0.55 per share. The exercise price of these warrants contains certain reset provisions which require the fair value of the warrants to be reported as a liability and not in permanent equity. On the date of issuance, the Company calculated the fair value of these warrants to be $528,847. The total cash proceeds of $1,050,000 were first applied to the warrants with the remaining $521,153 being allocated to the common shares and being recorded in additional paid-in capital.   Between May 12 and August 23, 2011, the Company issued a total of 625,000 warrants for services rendered to the Company.  As of September 30, 2012, 495,000 warrants with a fair value of $296,882 had vested. During the year ended September 30, 2012, the Company recorded an expense of $54,014 to professional fees and $119,698 to research and development expense related to warrants vested during the period.   In connection with the December 16, 2011 financing, the investors received 916,678 Class J five year warrants to purchase common stock at an exercise price of $0.65 per share.  On the date of issuance, the Company calculated the relative fair value of these warrants to be $314,453.   On December 21, 2011, the Company issued a total of 3,125 warrants for services rendered to the Company. In conjunction with this issuance, the Company recognized $1,967 in consulting expense. The warrants are exercisable for five years at an exercise price of $0.65 per share. On March 3, 2012, the Company issued a total of 350,000 fully-vested warrants with a fair market value of $220,422 as a retainer for services to be rendered to the Company.  In accordance with ASC 505-50-25, the Company recorded the fair market value of the warrants as professional fees. On April 12, 2012, the Company issued a total of 15,000 fully-vested warrants with a fair market value of $12,775 as a retainer for services to be rendered to the Company.  In accordance with ASC 505-50-25, the Company recorded the fair market value of the warrants as professional fees. Between May 18, 2012 and July 11, 2012, the Company issued a total of 400,000 warrants with a fair market value of $357,394 for services yet to be rendered to the Company.  The 350,000 warrants vest in two equal amounts three and six months from the date of issuance while the remaining 50,000 warrants vest over four quarters effective October 11, 2012.  As of September 30, 2012, the Company has recorded $157,235 in professional fees related to the warrants that have vested to date. On June 28, 2012, the Company issued 3,179,410 replacement warrants under an incentive provision offered to investors who converted their series H warrants.  The warrants were valued at $2,663,204.  As the original warrants were issued as part of cash financing, the value of these warrants has been included as an offsetting entry within additional paid-in capital. On September 7, 2012, the Company issued 75,000 fully-vested warrants with a fair value of $65,978  to a related party  as compensation for the use of the office facilities and receptionist. Such warrants have an exercise price of $1.00 and will be exercisable for a period of five years. In accordance with ASC 505-50-25, the Company recorded the fair market value of the warrants as Professional Fees.   Below is a table summarizing the warrants issued and outstanding as of September 30, 2012. Date   Number     Exercise     Contractual     Expiration     Value if   Issued   Outstanding     Price     Life (Years)     Date     Exercised   Balance 10/1/08     13,509,857       1.18       5     Various       15,941,631   03/20/09     5,000,000       0.50       5     03/31/14       2,500,000   06/03/09     11,166,672       0.18       5     06/03/14       2,010,001   09/30/09     150,000       0.40       5     06/30/14       60,000   Expired     —       —       —       —       —   Balance 9/30/09     29,826,529       0.69       —       —       20,511,632   10/09/09     88,000       0.50       5     10/29/14       44,000   11/09/09     18,000       0.50       5     11/09/14       9,000   12/04/09     130,000       0.60       2     12/04/11       78,000   12/15/09     (5,583,336 )     0.18       —       —       (1,005,000 ) 01/15/10     5,583,336       0.55       5     01/15/15       3,070,835   01/15/10     (5,583,336 )     0.18       —       —       (1,005,000 ) 04/09/10     10,000       0.55       5     4/9/2015       5,500   07/23/10     93,000       0.50       3     07/23/13       46,500   Expired     —       —       —       —       —   Balance 9/30/10     24,582,193       0.89       —       —       21,755,467   12/30/10     2,520,000       0.55       5     12/30/15       1,386,000   05/12/11     55,000       0.50       5     05/12/16       27,500   06/13/11     300,000       0.50       2     06/13/13       150,000   07/15/11     100,000       0.54       5     07/15/16       54,000   07/15/11     120,000       0.54       2     07/15/13       64,800   08/23/11     50,000       0.67       3     08/23/14       33,500   Expired     (1,090,568 )     1.19       —       —       (1,297,776 ) Balance 9/30/11     26,636,625       0.83       —       —       22,173,491   12/16/11     916,678       0.65       5     12/16/16       595,841   12/21/11     3,125       0.65       5     12/21/16       2,031   03/03/12     350,000       0.65       5     03/03/17       227,500   04/10/12     (43,392 )     0.60       —       —       (26,035 ) 04/12/12     15,000       0.90       —     4/12/2015       13,500   05/18/12     350,000       0.95       —     5/18/2015       332,500   06/28/12     (5,299,002 )     0.55       —       —       (2,914,451 ) 06/28/12     3,179,410       1.20       5     06/28/17       3,815,292   07/11/12     50,000       0.95       3     07/11/15       47,500   07/17/12     (30,000 )     0.50       —       —       (15,000 ) 09/07/12     75,000       1.00       5     09/07/17       75,000   Expired     (620,530 )     0.79       —       —       (490,219 ) Balance 9/30/12     25,582,914       0.93       —       —       23,836,950                                             The outstanding warrants as of September 30, 2012 have an intrinsic value of approximately $4.88 million.