Equity Compensation Plans

6 Months Ended

Jun. 30, 2012

NOTE 15 – Equity Compensation Plans

In 2009, the Company adopted a stock compensation plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stock options or nonvested shares to officers and key employees. To date, the Company has only granted stock options settleable in shares. The Plan authorizes grants to purchase up to 10,000,000 shares of authorized but unissued common stock. Stock options can be granted with an exercise price less than, equal to or greater than the stock’s fair value at the date of grant. All awards have terms and vesting schedules as determined on a case-by-case basis by the Board of Directors.

On June 1, 2012, the Company granted non-qualified options to purchase an aggregate of 5,500,000 shares of its common stock to its Chief Executive Officer, its Chief Financial Officer and one employee at an exercise price of $0.10 per share.

At June 30, 2012, there were 4,500,000 additional shares available for the Company to grant under the Plan. The grant-date fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The weighted average assumptions for the June 30, 2012 grants are provided in the following table. The Company uses company specific historical data to estimate the expected term of the option, such as employee option exercise and employee post-vesting departure behavior. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. Since the Company’s shares are not publicly traded and its shares are rarely traded privately, expected volatility is estimated based on the average historical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve at the date of grant.

	June 30, 2012
Valuation assumptions:
Expected dividend yield		0.00	%
Expected volatility		369.51	%
Expected term (years)		10
Risk-free interest rate		1.67	%

Stock option activity during the periods indicated is as follows:

					Weighted
			Weighted		average
			average		remaining		Aggregate
	Number		exercise		contractual		intrinsic
	of shares		price		term		value
Balance at December 31, 2011		—	$	—		—		—
Granted		5,500,000		0.10		10		—
Exercised		—		—		—		—
Forfeited		—		—		—		—
Expired		—		—		—		—
Balance at June 30, 2012		5,500,000	$	—		10		—
Exercisable at June 30, 2012		5,500,000	$	0.10		10.0		—

The weighted average grant date fair value of options granted at June 30, 2012 and December 31, 2011 was $0.04 and $-, respectively. As of June 30, 2012, no options have been exercised.

The Company currently uses authorized and unissued shares to satisfy share award exercises.