Note 7 - STOCKHOLDERS EQUITY

6 Months Ended

Jun. 30, 2011

Stockholders' Equity Note, Stock Split

Note 7 – STOCKHOLDERS’ EQUITY

Common stock

As of June 30, 2011 and December 31, 2010, the Company has 100,000,000 shares of common stock authorized, 27,417,436 and 27,387,436 shares of common stock issued and outstanding, respectively, at par value of $0.001 per share.

On April 6, 2011, the Company issued 30,000 shares of common stock to an outside consultant. Stock compensation expense of $2.03 per share or $60,900 was recognized in the second quarter of 2011 related to this stock issuance.

On May 19, 2011, the Company awarded 779,193 shares of common stock (the “Award Stocks”) to its employees based on 2009 Incentive Stock Plan (see below).  The Award Stocks were recorded as a stock-based compensation expense of approximately $1.1 million, using the grant date closing stock price at $1.41 per share, for the three and six months ended June 30, 2011. The Award Stocks were not issued and outstanding until July 2011. The Award Stocks have been included in the calculation of “weighted average number of common stock outstanding” for the purpose of computation of basic income per share.

Warrants

500,000 warrants were issued in connection with the November 2, 2009 private placement of Series B Convertible Preferred Stock are exercisable for a period of five years from their issuance date at an initial exercise price of $3 per share.  The Company has the right at any time, on at least forty-five (45) day written notice, to redeem the outstanding warrants at a price of one cent ($0.01) per share provided the market price of the Company’s common stock equals to or exceeds $4.5 on each trading day for twenty (20) consecutive trading days ending on the trading day prior to the date that the Company intends to redeem the warrants. The warrants are classified as equity and amounts attributable to the warrants are classified within additional paid-in capital.

On June 1, 2010, the Company issued 55,000 warrants to an investor relations firm.  The warrants are exercisable by May 31, 2013 at $2 per share.

On June 1, 2011, the Company issued 32,353 warrants to an investor relations firm.  The warrants are exercisable by June 30, 2014 at $2.74 per share.

The following table summarizes the Company’s outstanding warrants as of June 30, 2011 and December 31, 2010.

			Exercise				Weighted Average
Grant date	Issued		Price		Outstanding		Exercise Price
November 2, 2009		500,000	$	3.00		500,000
June 1, 2010		55,000	$	2.00		55,000
Total, as of December 31, 2011		555,000				555,000	$	2.90
June 1, 2011		32,353	$	2.74		32,353
Total, as of June 30, 2011		587,353				587,353	$	2.89

Stock Options

The Company’s board of directors approved its 2009 stock plan (“2009 Incentive Stock Plan”) under which it may grant incentive and nonqualified stock options, stock awards or restricted stocks to eligible participants.  Options are generally granted for a term of 5 years.  Except for the options granted to the Company’s management on October 22, 2009, options granted under the Stock Plan generally vest annually in 3 equal installments, the first being on the first anniversary of the grant contingent upon employment with the Company on the vesting date.  Options granted on October 22, 2009 vest annually in 3 equal installments, the first being on the grant date. Except for the cancelled options, the options granted on October 27, 2010 were fully vested during the three and six months ended June 30, 2011.

The following table summarizes the Company’s outstanding options as of June 30, 2011 and December 31, 2010.

						Options							Options
						Outstanding							Outstanding
						as of							as of		Vested on		Vested on
Grant date	Number of option		Exercise Price		Expiry Date	December 31, 2010		Addition		Cancelled			June 30, 2011		December 31, 2011		June 30, 2011
October 22, 2009		980,000	$	2.60	October 21, 2014		846,667		-		-			846,667		586,667		586,667
December 30, 2009		100,000	$	4.45	December 29, 2013		100,000		-		-			100,000		33,333		33,333
October 27, 2010		120,000	$	2.80	October 26, 2015		120,000		-		(70,000	)		50,000		-		50,000
April 7, 2011		70,000	$	1.97	April 6, 2016		-		70,000		-			70,000		-		-
April 7, 2011		20,000	$	2.60	April 6, 2014		-		20,000		-			20,000		-		-
Total		1,290,000					1,066,667		90,000		(70,000	)		1,086,667		620, 000		670,000
Weighted Average Exercise Price						$	2.8						$	2.74
Weighted Average Remaining Life (in years)							3.5							3.5