EQUITY

6 Months Ended

Jun. 30, 2011

EQUITY [Abstract]

EQUITY

Common Stock issued on Converted Notes

During the second quarter, Z Trim Holdings, Inc. (the "Company") issued 273,620 shares of its common stock, $.00005 par value per share, upon conversion to common stock of  its 8% Convertible Secured Notes Due in 2011 (the "Notes"), principal of $234,500 and interest of $39,120.

During the first quarter of 2011, the Company issued 4,332,529 shares of common stock for conversion of principle of 3, 714, 500, and interest of 618,029.

For the six months ended June 30, 2011, the company issued 4,606,149 shares of its common stock, $.00005 par value per share.  As a result of the conversion of the Notes into common stock, the Company has reduced its total outstanding convertible debt to $1,904,000 and increased its common stock and additional-paid-in capital by an aggregate of $7.35 million.

Common Stock Issued to Directors

On January 7, 2011 the Company issued 140,000 shares of common stock to four of its external directors (35,000 each) – Mark Hershhorn, Brian Israel, Morris Garfinkle and Edward Smith III. The Company recognized a total of expense of $141,400 related to these issuances.

Common Stock Issued for Services

On April 12, 2011, the Company entered into an Agreement for Services with AIM Capital Corporation, pursuant to which AIM agreed to provide public relations services to us for a period of twelve months. In exchange for AIM’s services, we agreed to pay Aim an annual fee of 125,000 shares of common stock which will vest as follows: 50,000 upon execution of agreement, 25,000 on the 90th day following this agreement, 25,000 on the 180th day following this agreement, and 25,000 on the 270th day following this agreement. The agreement also includes that should either party terminate this agreement, AIM shall be entitled to keep all vested a shares as of the date of termination, plus any pro rata amount of shares based on the termination date.

Therefore, as of June 30, 2011, the Company issued 125,000 shares of common stock.  50,000 shares vested and are valued at $85,000, based on the closing price on the measurement date, April 12, 2011, of $1.70.  The remaining 75,000 unvested shares have a fair value of $42,243, based on the closing price at period end, June 30, 2011, of $1.05. We also entered into registration rights agreements pursuant to which we have agreed to file with the Securities and Exchange Commission a registration statement covering the resale of the Common Stock underlying the issuance above. This registration statement was filed on June 2, 2011, and went effective on June 3, 2011.

On February 9, 2011, the Company entered into an Investment Banking Agreement with Legend Securities, Inc. ("Legend"), pursuant to which Legend agreed to provide business advisory services to us for a period of up to twelve months. In exchange for Legend's services, we agreed to pay Legend the sum of $10,000 per month and to issue Legend a onetime fee of 350,000 shares of Common Stock. Per the agreement, the shares will be issued as follows: 87,500 1 day after the effective date, 87,500 90 days after the effective date, 87,500 180 days after the effective date and 87,500 270 days after the effective date.

Therefore, as of June 30, 2011, the Company issued 175,000 shares of common stock valued at $253,752 based on the closing price on the measurement date. The remaining 175,000 shares will be issued on the upcoming vesting dates. We also entered into registration rights agreements pursuant to which we have agreed to file with the Securities and Exchange Commission a registration statement covering the resale of the Common Stock underlying the issuance above. This registration statement was filed on June 2, 2011, and went effective on June 3, 2011.

We determined that all of the securities issued pursuant to the agreement were exempt from registration under the Securities Act of 1933, as amended (the "Act") pursuant to Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the Act. We based this determination on the non-public manner in which we offered the securities and on the representations of the persons purchasing such securities, which included, in pertinent part, that such persons were "accredited investors" within the meaning of Rule 501 of Regulation D promulgated under the Act, and that such persons were acquiring such securities for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to resale or distribution, and that each such person understood such securities may not be sold or otherwise disposed of without registration under the Act or an applicable exemption therefrom.

The description of the terms of sale of the securities described in this report is qualified in its entirety by reference to the full text of the underlying document which has been filed as exhibits to the Company’s Form 8-K filed with SEC on February 11, 2011.

Exercising of Stock Warrants and Options

During the second quarter of 2011, no stock warrants were exercised.

During the first quarter of 2011, 49,358 warrants were exercised for cash of $2,725.

Common Stock Issued on the Cashless Exercise of Warrants

We have not issued any shares of common stock on the cashless exercise of warrants in 2011 compared to the issuance of 207,585 shares of common stock on the cashless exercise of warrants during the first six months of 2010.