2010 Offering

9 Months Ended

Sep. 30, 2011

2010 Offering

Note 11.  2010 Offering

On May 4, 2010, the Company’s registration statement on Form S-1 (the “Registration Statement”) was declared effective by the SEC, and the Company commenced its self directed public offering (the “2010 Offering”) in accordance with the Prospectus dated May 4, 2010 and included in the Registration Statement, of up to a maximum of 200,000,000 units (the “Units”) of its securities at a price of $0.01 per Unit.  Each Unit consists of:

·   one (1) share of the Company’s common stock, $0.00001 par value per share; and,

·   one-half of one Series B Warrant (collectively, the “Series B Warrants”).

Each full Series B Warrant entitles the holder to purchase one additional share of the Company’s common stock at an exercise price of $0.03 per share, expiring two (2) years from the date of issuance of the Series B Warrants.

The 2010 Offering was a direct public offering by the Company, without any involvement of underwriters or broker-dealers.  The 2010 Offering terminated on October 31, 2010.

As of the termination date of the 2010 Offering, the Company sold 40,000,000 Units (all on May 19, 2010) for gross receipts of $400,000 pursuant to the terms of the 2010 Offering.  Accordingly, the Company issued 40,000,000 shares of its common stock and Series B Warrants to purchase up to 20,000,000 shares of common stock at an exercise price of $0.03 per share to the investors having subscribed for the 40,000,000 Units.

At the time of grant, the fair value of the Series B Warrants as calculated using the Black-Scholes model was $607,995 using the following assumptions: dividend yield of 0%, expected volatility of 152.5%, risk-free interest rate of 0.8%, and expected term of two years.  The portion of the proceeds from the 2010 Offering allocated to the Series B Warrants was $110,144.