Equity

3 Months Ended

Sep. 30, 2011

Equity:

Stockholders' Equity Note Disclosure

4. Common Stock

Pursuant to the Articles of Incorporation as amended on September 19, 2007, the Company is authorized to issue 100,000,000 common shares, with a par value of $0.01 per share.

During the three months ended September 30, 2011 and 2010, the Company issued nil and 6,039,215 shares, respectively. The shares issued at September 30, 2010 consisted of 6,000,000 shares issued for compensation and 39,215 for conversion of convertible notes plus accrued interest. 

The company received $79,200 in cash for common stock subscribed during the three months ended September 30, 2011, of which $54,200 was from a related party. The related party stock is subscribed at $1.00 per share in accordance with a Capital Base Funding Agreement. The remaining stock was subscribed at the posted market rate on the funding date.

5.  Common Stock Subscribed

As of September 30 and June 30, 2011 the Company had common stock subscribed in the amounts of $204,200 and $125,000, respectively. These represented subscriptions for 429,200 and 250,000 shares, respectively.

6.  Convertible Notes Payable and Warrants

During the three months ended September 30, 2011 and 2010, the Company issued nil and $1,091,464 convertible notes payable and nil and 1,091,464 attached warrants to third party investors in exchange for nil and $1,082,207 in cash and nil and $9,257 in stock subscriptions receivable, respectively.  There have been no defaults on the notes as of September 30, 2011.  The notes are convertible into common shares at a conversion price of $0.25 per share with 1,091,464 attached warrants exercisable into common shares at $0.25 per warrant.  As at September 30, 2011 all but $5,000 of the notes were converted to common stock.

Convertible notes payable consisted of the following:

	September 30, 2011	June 30, 2011
Unsecured convertible notes payable with a 12% interest	$                             5,000	$                      5,000
rate and convertible at $0.25 per common share
Note Discount	(36)	(64)
	$                            4,964	$                    4,936

The Company issued attached warrants to purchase its common stock with the issuance of the convertible notes payable.  The warrants have an exercise price of $0.25 with a three year expiration and immediate vesting.  The fair value of each issuance is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates assumptions for each input. Expected volatilities are based on the historical volatility of the Company’s common equity traded on the OTC market. The Company estimates expected life of each warrant based on the midpoint between the date the warrant vests and the contractual term of the warrant. The risk-free interest rate represents the U.S. Treasury bill rate for the expected life of the related warrant.

The Black-Scholes option pricing model inputs used on the date of issuance have the following assumptions: stock price on the measurement date was between $0.05 and $0.60; expected term of three years; average expected volatility was 257%; and discount rate of 1.26%. 

The following table summarizes information about the warrants as of September 30, 2011 and June 30, 2011:

	Shares Under Warrants	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding as of June 30, 2011	2,562,214	$        0.25	2.25Years
Granted	-	$              -
Expired	-	$              -
Exercised	-	$              -
Outstanding as of September 30, 2011	2,562,214	$        0.25	2.00 Years	$  243,410
Exercisable as of September 30, 2011	2,562,214	$        0.25	2.00Years	$  243,410

The year-end intrinsic values are based on a September 30, 2011 closing price of $0.345 per share.