Net Income (Loss) per Share

9 Months Ended

Sep. 30, 2011

Note 5. Net Income (Loss) per Share

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common and dilutive common equivalent shares outstanding during the period.

During the three and nine months ended September 30, 2011 and the three months ended September 30, 2010, the Company recorded a net loss. Therefore, the issuance of shares of common stock from the exercise of stock options and warrants would be anti-dilutive. There are no stock options outstanding at September 30, 2011. Excluded from the computation of diluted net loss per share for the three and nine months ended September 30, 2011, because their effect would be anti-dilutive, are warrants to acquire 20,000,000 shares of common stock with a weighted-average exercise price of $0.03 per share and convertible notes payable and accrued interest to acquire 131,431,637 shares of common stock with a conversion price of $0.01 per share. See “Note 10. Notes Payable and Convertible Notes Payable” below.

Excluded from the computation of diluted net loss per share for the three months ended September 30, 2010 because their effect would be anti-dilutive, are stock options and warrants to acquire 20,200,000 shares of common stock with a weighted-average exercise price of $0.03 per share and convertible notes payable and accrued interest to acquire 113,872,608 shares of common stock with a conversion price of $0.01 per share. See “Note 10. Notes Payable and Convertible Notes Payable” below.

There were no securities outstanding at September 30, 2010 that were excluded from the computation of diluted net income per share for the nine months ended September 30, 2010.

For purposes of earnings per share computations, shares of common stock that are issuable at the end of a reporting period are included as outstanding.

Following is the computation of basic and diluted net income (loss) per share for the three and nine months ended September 30, 2011 and 2010:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010

Basic Net Income (Loss) Per Share Computation
Numerator: net income (loss)	$	(65,521	)	$	(139,054	)	$	(241,921	)	$	2,162,368

Denominator:
Weighted average number of common shares outstanding		241,487,995			241,487,995			241,487,995			221,121,695

Basic net income (loss) per share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	0.01

Diluted Net Income (Loss) Per Share Computation
Numerator: net income (loss)	$	(65,521	)	$	(139,054	)	$	(241,921	)	$	2,162,368
Add: convertible notes payable interest expense and accreted discount		-			-			-			57,785
Adjusted net income (loss)	$	(65,521	)	$	(139,054	)	$	(241,921	)	$	2,220,153

Denominator:
Weighted average number of common shares outstanding		241,487,995			241,487,995			241,487,995			221,121,695
Effect of dilutive securities:
Warrants		-			-			-			1,271,765
Assumed conversion of convertible notes payable		-			-			-			112,050,303
Total shares		241,487,995			241,487,995			241,487,995			334,443,763

Diluted net income (loss) per share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	0.01