Quarterly report pursuant to Section 13 or 15(d)

COMMON STOCK OPTIONS

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COMMON STOCK OPTIONS
 3 Months Ended
Dec. 31, 2011
Common Stock Options  
COMMON STOCK OPTIONS
NOTE 8 – COMMON STOCK OPTIONS
 
The Company has determined the estimated value of the options granted to employees and non-employees in exchange for services and financing expenses using the Black-Scholes pricing model and the following assumptions: stock price at valuation, $0.40; expected term of five years, exercise price of $0.50, a risk free interest rate of 2.60 percent, a dividend yield of 0 percent and volatility of 277 percent.
 
On April 12, 2010 the Company granted 1,000,000 options to employees as part of its 2009 stock option plan.  The Company calculated a fair value of $0.40 per option. Of the 1,000,000 options issued, 520,000 vested upon issuance and the remaining 480,000 vest over the five year life of the options.  As of December 31, 2011, 700,000 options have vested resulting in compensation expense of $279,416.  In each of the three month periods ended December 31, 2011 and 2010, 30,000 shares vested, resulting in compensation expense in each period of $11,975.

Below is a table summarizing the options issued and outstanding as of December 31, 2011.

Date
  
Number
    
Exercise
    
Contractual
    
Expiration
    
Value if
  
Issued
  
Outstanding
    
Price
    
Life (Years)
    
Date
    
Exercised
  
Prior 10/1/2008
     —     $ —       —       —     $ —  
04/09/09
     579,141       0.65       5    
04/09/13
       376,442  
09/30/09
     579,141       0.65       —       —       376,442  
04/12/10
     1,000,000       0.50       5    
04/12/15
       500,000  
Expired
     (32,176 )     0.65       —       —       (20,914 )
Balance 9/30/2010
     1,546,965     $ 0.55       —       —     $ 855,528  
Issued
     —       —       —       —       —  
Expired
     —       —       —       —       —  
Balance 9/30/2011
     1,546,965     $ 0.55       —       —     $ 855,528  
Issued
     —       —       —       —       —  
Expired
     —       —       —       —       —  
Balance 12/31/2011
     1,546,965     $ 0.55       —       —     $ 855,528