STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2011

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

Note 4. STOCKHOLDERS' EQUITY

On March 7, 2011, the Company issued a total of 100,000 shares of common stock, pursuant to a consultancy agreement dated February 17, 2011. The Company terminated the agreement on May 3, 2011 and 50,000 shares are subject to return to the Company. Said shares were returned to the Company and cancelled on June 23, 2011, decreasing the Company's total outstanding shares by 50,000. The Company valued these shares at $21,500 based on the market price and recognized on expense in the amount of $0 and $21,500 ,which was included in stock-based compensation expense for the three and nine months ended September 30, 2011, respectively.

On February 10, 2010, the Company effected a 2.5:1 reverse stock split on its then outstanding shares of common stock. As a result of the reverse stock split, the outstanding shares of the Company's common stock were reduced to 10,000,000 from 25,000,000. In connection therewith, fractional shares were rounded up to whole shares and as a result, an additional 344 shares of common stock were issued to certain stockholders of the Company. No consideration was received by the Company for the shares of its common stock issued as a result of rounding up the fractional shares. All share amounts in the accompanying condensed consolidated financial statements have been adjusted to give effect to this reverse stock split.

Stock-based Compensation

During the three and nine months ended September 30, 2011 and 2010, the Company recognized stock- based compensation expense of $3,475 and $20,555 and $297,665 and $892,996, respectively, which is included in compensation expense. The amounts relate to the granting of options to the Company's President and Chief Executive Officer to purchase 900,000 shares of the Company's common stock with an exercise price of $0.45 per share in October 2009 which vested in 12 equal monthly installments valued at $231,300, from the granting of options to employees and consultants to purchase 3,600,000 shares of the Company's common stock with an exercise price of $0.45 per share in October 2009 which vested in 12 equal monthly installments valued at $925,000, and 648,000 shares of the Company's common stock with a grant price of $0.375 per share in January 2010 which vest in 4 equal annual installments valued at $125,064. As of September 30, 2011, all of the options were vested except for 486,000 of the 648,000 options granted to employees and consultants. At September 30, 2011 and December 31, 2010, the amount of unamortized stock-based compensation expense on unvested stock options granted to employees and consultants was $70,349 and $102,483, respectively.

Stock option activity

The following table summarizes the stock option activity for the nine-month period ended September 30, 2011:

	Stock Options Outstanding
Options outstanding at January 1, 2011		5,208,000
Granted and assumed		-
Exercised		-
Forfeited/expired/canceled		(60,000	)
Options outstanding at September 30, 2011		5,148,000
Options exercisable at September 30, 2011		4,662,000

At September 30, 2011, the weighted average exercise price for stock options and the related grant date fair value per share for stock options was $0.44 per share.

Net Income (loss) per Share

Basic net income per common share is computed by dividing the net income available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the reporting period. Diluted net income per common share reflects the effects of potentially dilutive securities, which consist of stock options of 5,148,000 for 2011 and 5,208,000 for 2010 only in periods, which such effect is dilutive. Dilutive earnings per share was not presented because the effect of the stock options under the treasury stock method would have been antidilutive.