Equity

6 Months Ended

Dec. 31, 2011

Equity:

Stockholders' Equity Note Disclosure

5. 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 six months ended December 31, 2011 and 2010 the Company issued nil and 19,471,383 shares, respectively. The Company issued nil and 10,271,383 shares on the conversion of convertible notes payable during the six months ended December 31, 2011 and 2010.  The Company issued nil and 6,000,000 shares for compensation during the six months ended December 31, 2011 and 2010, respectively. The Company issued nil and 3,200,000 shares for services during the six months ended December 31, 2011 and 2010, respectively.

The Company received $136,200 in cash for common stock subscribed during the six months ended December 31, 2011. A total of $54,200 was received from a related party 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.

6.  Common Stock Subscribed

As of December 31, and June 30, 2011 the Company had common stock subscribed in the amounts of $261,200 and $125,000, respectively. These represented subscriptions for 657,200 and 250,000 shares, respectively.

7.  Convertible Notes Payable and Warrants

During the six months ended December 31, 2011 and 2010, the Company issued nil and $1,567,964 convertible notes payable and nil and 1,567,964 attached warrants to third party investors in exchange for nil and $1,564,941 in cash and nil and $2,534 in subscription receivable, respectively. The notes have a one year maturity and bear interest at a rate of 12% per annum. The notes are convertible into common shares at a conversion price of $0.25 per share. As of December 31, 2011 all but $5,000 of the notes were converted to common stock.

Convertible notes payable consisted of the following:

	December 31, 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 December 31, 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	2.25 Years	$              -
Granted	-	$              -
Expired	-	$              -
Exercised	-	$              -
Outstanding as of December 31, 2011	2,562,214	$        0.25	1.75 Years	$  128,111
Exercisable as of December 31, 2011	2,562,214	$        0.25	1.75 Years	$  128,111

The year-end intrinsic values are based on a December 31, 2011 closing price of $0.30 per share.