Note 12 - Warrant Liabilities

3 Months Ended

Jun. 30, 2012

NOTE 12 – WARRANT LIABILITIES

In March and June 2010, the Company issued 4,200,000 shares of common stock and Warrants to purchase 4,000,000 shares of Common Stock (Series B warrants) to three accredited institutional funds and an accredited investor for $2,000,000.

The exercise price of the Series B Warrants is subject to adjustments in certain circumstances for stock splits, combinations, dividends and distributions, reclassification, exchange or substitution, reorganization, merger, consolidation or sales of assets, issuance of additional shares of common stock or equivalents. As a result of its interpretation, the Company concluded that the Series B Warrants and Option to purchase additional common stock and Series B Warrants should be treated as derivative liabilities because the warrants are entitled to a price adjustment provision to allow the exercise price to be reduced in the event the Company issues or sells any additional shares of common stock at a price per share less than the then-applicable exercise price or without consideration, which is typically referred to as a “down-round protection” or “anti-dilution” provision. The Company uses Level 2 inputs to measure fair value of its warrant liability.

During the nine months ended June 30, 2012, the Company's warrant liabilities accounts were as follows:


Opening balance, October 1, 2011	$	1,545,098
Issued in nine months ended June 30, 2012		-
Change in warrant liabilities		(1,010,776)
Exercised in nine months ended June 30, 2012		-
Closing balance, June 30, 2012	$	534,322

The following table summarizes the shares of the Company's common stock issuable upon exercise of warrants outstanding at June 30, 2012:


Warrants Outstanding									Warrants Exercisable
Range of Exercise Price		Number of shares underling warrants Outstanding at June 30, 2012		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number of shares underling warrants Exercisable at June 30, 2012			Weighted Average Exercise Price
$	0.70		2,000,000		0.73	$	0.70			2,000,000	$	0.70
$	1.00		2,000,000		0.94		1.00			2,000,000		1.00
			4,000,000		0.83	$	0.85			4,000,000	$	0.85