4. COMMON STOCK

9 Months Ended

Sep. 30, 2012

Equity [Abstract]

COMMON STOCK

At September 30, 2012, the Company's authorized capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. On that date, the Company had outstanding 38,860,891 shares of common stock, and no shares of preferred stock. During the nine months ended September 30, 2012, the Company issued shares of common stock and warrants in the following transactions:

• On May 18, 2012, the Company issued 3,335,500 shares of common stock and warrants for 3,335,500 shares of common stock for extinguishment of debts totaling $1,667,750 (see Note 5 for further discussions). The shares were valued at the market price of our common stock on the date of issuance and the warrants were valued using the Black-Scholes options pricing model (see Note 5). The shares and warrants were collectively valued at $531,695.
• On July 10, 2012, the Company issued 200,000 shares of common stock for an employee signing bonus valued at $0.09 per share, which was the market price on the date of issuance.
• On July 30, 2012, the Company issued 75,000 shares of common stock and a warrant to purchase 75,000 shares of common stock for consulting services to be rendered over a three year period. The shares were valued at the market price of our common stock on the date of issuance and that warrants were valued using the Black-Scholes options pricing model (see Note 5). The common stock and warrant were collectively valued at $15,000 for services.

Warrants

During the nine months ended September 30, 2012, the Company issued the following warrants at corresponding exercise price as of September 30, 2012.

Date of Issuance	Number of Warrants		Exercise Price		Contractual Life	Number of  Shares Exercisable
05/31/2012		1,834,525	$	0.50	3 years		1,834,525
05/31/2012		1,500,975	$	0.50	3 years		1,500,975
07/30/2012		75,000	$	0.50	3 years		75,000
		3,410,500					3,410,500

The warrants issued on May 31, 2012 were valued at approximately $231,500 using the Black-Scholes options pricing model under the following assumptions: stock price at issuance of $0.09 per share; 3 year life; discount rate of 4.29%; and volatility rate of 228%.

The warrants issued on July 30, 2012 were valued at approximately $7,500 using the Black-Scholes options pricing model under the following assumptions: stock price at issuance of $0.10 per share; 3 year life; discount rate of 4.29%; and volatility rate of 228%.