NOTE 9 – STOCK OPTIONS

On July 30, 2012, the Company entered into two 12-month Consulting Services and Finder’s Fee Agreements (the “Consulting Agreements”) with third parties. The Consulting Agreements require the consultants to provide to the Company, customized problem and opportunity research, new business or services development, strategy development and refinements, acquisition assistance, marketing and investor relation services and the Company is required to grant to each of the consultants a total of 150,000 stock options vesting immediately and exercisable at $0.25 per share. The Company granted 300,000 stock options which have vested. The stock options expired on September 30, 2013 which was 60 days after the termination of the Consulting Agreements.

The following table summarizes information concerning stock options as of June 30, 2014:

	June 30, 2014				June 30, 2013
		Shares		Weighted Average Exercise Price $	Shares		Weighted Average Exercise Price $
Outstanding at beginning of the year			300,000	0.25		-	-
Granted			-	-		300,000	0.25
Exercised			-	-		-	-
Expired or cancelled			(300,000)	(0.25)		-	-
Outstanding at end of period			-	-		300,000	0.25

The Company recognized stock-based compensation of $187,200 in the fiscal year ended June 30, 2013.

Valuation Assumptions

The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model. The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price and expected dividends.

Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when options are given for service without further recourse. The Company issued stock options to contractors to provide services to the Company during the fiscal year. However, the stock options have already been granted to the service providers and there is no claw back provision in the options if services are not performed. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of compensation for services to be rendered with no recourse.

The following table presents the range of the weighted average fair value of options granted and the related assumptions used in the Black-Scholes model for stock option grants made during the fiscal year ended June 30, 2013:

	Options Granted
	July 30, 2012
Fair value of options granted	$	0.85
Assumptions used:
Expected life (years) (a)		1.00
Risk free interest rate (b)		0.18	%
Volatility (c)		111	%
Dividend yield (d)		0.00	%

	a)	Expected life: The expected term of options granted is determined using the “shortcut” method allowed by SAB No.107. Under this approach, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.

	b)	Risk-free interest rate: The rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected life of the options.

	c)	Volatility: The expected volatility of the Company’s common stock is calculated by using the historical daily volatility of the Company’s stock price calculated over a period of time representative of the expected life of the options.

	d)	Dividend yield: The dividend yield rate is not considered in the model, as the Company has not established a dividend policy for the stock.