Summary of Significant Accounting Policies

9 Months Ended

Jul. 31, 2012

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

6. Summary of Significant Accounting Policies

The accounting policies followed are as set forth in Note 1 of the Notes to Financial Statements in the Company’s 2011 Annual Report on Form 10-K. The Company has not experienced any material change in its critical accounting policies since November 1, 2011. The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments regarding uncertainties that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, the Company evaluates its estimates, which are based upon historical experience and on other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The Company considers the following accounting policies to be most critical in their potential effect on its financial position or results of operations.

New Accounting Pronouncements

The following accounting standards updates were recently issued and have not yet been adopted by us. These standards are currently under review to determine their impact on our consolidated financial position, results of operations, or cash flows.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosure about Offsetting Assets and Liabilities, which requires an entity to include additional disclosures about financial instruments and transactions eligible for offset in the statement of financial position, as well as financial instruments subject to a master netting agreement or similar arrangement. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of this ASU is not expected to have a material impact on our financial statements.

June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which defers specific requirements to present reclassification adjustments for each component of accumulated other comprehensive income. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of ASU 2011-05 has not had a material effect on the Company’s operating results or financial position.

Earnings Per Share

Basic earnings per share are based on the weighted average number of shares outstanding for a period. Diluted earnings per share are based upon the weighted average number of shares and potentially dilutive common shares outstanding. Potential common shares outstanding principally include convertible notes payable and stock options under our stock plan. Since the Company has incurred losses, the effect of any common stock equivalent would be anti-dilutive.

Stock Based Compensation

Stock-based compensation costs for stock options issued to employees is measured at the grant date, based on the fair value of the award using the Black Scholes Option Pricing Model, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).

No stock-based compensation was recognized during the nine months ended July 31, 2012.

On February 14, 2012, the Board of Directors adopted the 2012 Employee Benefit Plan which is authorized to grant up to sixty (60) million shares of common stock or options to purchase common stock to eligible employees, directors, officers, consultants or advisors. Eligibility is determined by the Board of Directors. On April 30, 2012, the Company issued 14,250,000 shares of common stock under the Plan to a consultant for services rendered. The value of the shares was $57,000, or $0.004 per share.

The following table summarizes information about options granted under the Company’s equity compensation plans through July 31, 2012 and otherwise to employees, directors and consultants of the Company. Generally, options vest on an annual pro rata basis over various periods of time and are exercisable, upon proper notice, in whole or in part at any time upon vesting. Typically, in the case of an employee, vested options terminate when an employee leaves the Company. The options granted have contractual lives ranging from two to ten years.

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at October 31, 2011		3,000,000	$	0.09		2.1	$	—
Granted		—		—
Exercised		—		—
Expired		—		—
Canceled		—		—
Outstanding at July 31, 2012		3,000,000	$	0.09		1.4	$	—

Summary information about the Company’s options outstanding at July 31, 2012 is set forth in the table below. Options outstanding at July 31, 2012 expire between August 2012 and January 2016.

Range of Exercise Prices		Options Outstanding July 31,  2012		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Options Exercisable July 31,  2012		Weighted Average Exercise Price
	$ 0.02 - $0.14		2,300,000		1.6	$	0.026		2,300,000	$	0.026
	$ 0.29 - $0.30		700,000		0.5	$	0.29		700,000	$	0.29
TOTAL:			3,000,000						3,000,000

As of July 31, 20121, all outstanding options had fully vested and there was no estimated unrecognized compensation from unvested stock options.

The following table summarizes the information relating to warrants granted to non-employees as of October 31, 2011 and changes during the nine months ended July 31, 2012:

	Number of Warrants			Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at October 31, 2011	5,000,000		$	0.015	0.9	$	—
Granted	40,000,000			0.002	3.0		64,000
Exercised	—			—
Expired	(1,000,000	)		0.03
Canceled	—			—
Outstanding at July 31, 2012	44,000,000		$	0.003	2.5	$	64,000

Summary information about the Company’s warrants outstanding at July 31, 2012 is set forth in the table below. Warrants outstanding at July 31, 2012 expire between August 2012 and May 2015.

Range of Exercise Prices		Warrants Outstanding July 31,  2012		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Warrants  Exercisable July 31,  2012		Weighted Average Exercise Price
$	0.002		40,000,000		2.7	$	0.002		40,000,000	$	0.002
$	0.011		4,000,000		0.2	$	0.011		4,000,000	$	0.011
			44,000,000						44,000,000