Stockholders' Equity

9 Months Ended

Sep. 30, 2012

Stockholders' Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 10– STOCKHOLDERS’ EQUITY

(a)        Preferred stock issued for warrants modification

On February 7, 2012, in an effort to induce its warrant holder to exercise their warrants, the Company signed an agreement with Barron Partners LP (“Barron”), pursuant to which Barron, as the holder of warrants to purchase 55,158 shares of common stock at $12.00 per share and 165,000 shares of common stock at $16.98 per share, agreed to exchange or convert such warrants into (i) 2,201,582 shares of the Company’s series A preferred stock which are convertible into 73,386 shares of common stock, and (ii) warrants to purchase 73,386 shares of this Company’s common stock at $2.70 per common share, with the proceeds from the exercise of the warrants being used to pay expenses incurred by the Company in connection with its public company expenses. In connection with the warrant modification, the Company valued the 2,201,582 series A preferred shares issued at fair market value on the date of grant of $197,408 based on the 73,386 common shares issuable upon conversion of the series A preferred stock multiplied by the quoted trading price of the common stock on the grant date of $2.70 per share.  In connection with the transaction, on February 7, 2012, the Company revalued the fair market value of the original warrants by using the Black-Scholes option-pricing model.    The total fair market value of the original warrants was estimated to be $52,896 on February 7, 2012. The fair market value of the newly issued exchanged warrants was estimated to be $90,621 using the Black-Scholes option-pricing model.  In connection with the Black-Scholes option pricing calculation, the following weighted-average assumptions were used:  stock price of $2.70; expected dividend yield 0%; risk-free interest rate of 0.15%; volatility of 139.58% and an expected term of 0.77 year. The Company recorded the difference between the fair market value of original warrants of $52,896 and the fair market value of exchanged warrants of $90,621 which amounted to $37,725 as a warrants modification expense with a corresponding credit of additional paid-in capital.  Accordingly, for the nine months ended September 30, 2012, the Company recorded an aggregate warrant modification expense of $235,133 on the accompanying consolidated statement of income. For the three months ended September 30, 2012, the Company did not record any warrant modification expense.

(b)        Common stock issued for services

During the nine months ended September 30, 2012, the Company issued a total of 51,450 shares of common stock pursuant to its 2010 long-term incentive plan, of which 250 shares were issued to a director, 10,000 shares were issued to the chief executive officers and 41,200 shares were issued to other employees and consultants.  The shares were valued at the fair market value on the date of grant.During the nine months ended September 30, 2012, the Company record stock-based compensation of $129,030 and prepaid expense of $27,440, which is being amortized over the balance of 2012.

(c)        Common stock issued for preferred share conversions

During the nine months ended September 30, 2012, the Company issued 439,912 shares of common stock upon the conversion of 13,197,389 shares of series A preferred stock. As of September 30, 2012, the Company had no series A preferred stock outstanding.

(d)        Common stock issued on exercise of warrants

During the nine months ended September 30, 2012, the Company issued 73,386 shares of its common stock upon the exercise of warrants, for which the Company received cash proceeds of $198,142.  At September 30, 2012, there were no warrants outstanding.

Warrant activity for the nine months ended September 30, 2012 was summarized as follows:

	Nine Months Ended September 30, 2012
	Number of Warrants			Weighted Average Exercise Price
Balance at December 31, 2011		220,158		$	15.73
Granted		73,386			2.70
Exercised		(73,386	)		(2.70	)
Cancelled		(220,158	)		(15.73	)
Balance at September 30, 2012		-		$	-
Warrants exercisable at September 30, 2012		-		$	-