Equity Transactions

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Equity Transactions

7. EQUITY TRANSACTIONS

As of March 31, 2012, the company has outstanding: (i) 46,033,565 shares of common stock; (ii) 220,000 warrants; (iii) 630,332 options; and, (iv) preferred stock that are convertible into 1,450,000 shares of common stock, resulting on a fully diluted basis, 48,333,897 shares of common stock. The company has 50,000,000 shares of common stock authorized by our Articles of Incorporation.

Bluegate used the Black-Scholes option pricing model to value stock options and warrants using the following assumptions: number of options as set forth in the option agreements; no expected dividend yield; expected volatility ranging from 202% to 260%; risk-free interest rates of 5.0%; and expected terms based on the period of time expected to elapse until exercise. When applicable, Bluegate uses the simplified method of calculating expected term as described in ASC 718.