6 COMMON STOCK TRANSACTIONS

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 expenses for the amount of $0 and $21,500 included in stock-based compensation expense for the three and six months ended June 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 50,000,000. 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 six months ended June 30, 2011 and 2010, the Company recognized stock based compensation expense of $8,540 and $17,080 and $297,665 and $595,331, respectively, which is included in compensation expense. The amounts relate to the granting of options to its 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 708,000 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 $136,644. As of June 30, 2011, all of the options were vested except for 531,000 of 708,000 options granted to employees and consultants. At June 30, 2011 and December 31, 2010, the amount of unamortized stock-based compensation expense on unvested stock options granted to employees and consultants was $85,403 and $102,483, respectively.

The following is a summary of the Company’s stock option activity as of December 31, 2010 and June 30, 2011:

			Weighted
	Stock		Average
	Options Outstanding		Grant Date Fair Value
Outstanding at December 31, 2010 and June 30, 2011		5,208,000	$	0.44

Net Income 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 5,208,000 for 2011 and 5,208,000 for 2010. Dilutive earnings per share was not presented since the effect of the options under the treasury stock method would have been antidilutive and the Company incurred losses in 2010.