OPTIONS AND WARRANTS

9 Months Ended

Jul. 31, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Shareholders' Equity and Share-based Payments [Text Block]

NOTE 19 - OPTIONS AND WARRANTS

Share-based compensation amounted to $22,877 and $36,182 for the three months ended July 31, 2012 and 2011, respectively, and $71,493 and $96,981, respectively, for the nine months ended July 31, 2012 and 2011.

(1)  2003 Omnibus Plan

On February 28, 2003, our board of directors approved the Renhuang Pharmaceuticals, Inc. 2003 Omnibus Securities Plan (the “2003 Plan”), which was approved by our shareholders on April 11, 2003. The 2003 Plan offers selected employees, directors, and consultants opportunities to acquire our common stock, and serves to encourage such persons to remain employed by us and to attract new employees. The 2003 Plan allows for the award of stock and options, up to 25,000 (after giving effect to the 1-for-30 reverse stock split in 2006) shares of our common stock. On May 1, of each year, the number of shares in the 2003 Securities Plan is automatically adjusted to an amount equal to ten percent of our outstanding stock on October 31, of the immediately preceding year. As of July 31, 2012 and October 31, 2011, there were 3,723,954 shares available for issuing subject to the 2003 Omnibus Securities Plan.

a) On December 14, 2010, we appointed Mr. Weiqiu Dong as our chief financial officer. Based on the employment agreement, Mr. Dong received, on December 14, 2010, an option to purchase 200,000 shares of the Company's common stock with an exercise price of $2.15 per share, under the 2003 Omnibus Plan. The option vests 60,000 shares on the first anniversary of the date of grant and 70,000 shares on each of the second and third anniversaries of the date of grant. The Option is conditioned upon continued employment on such date, and has a contractual life of 3 years. 

The fair value of the option award is estimated on the date of grant using the Black-Scholes option valuation model to be $259,251, of which $20,040 and $62,982 were recorded as compensation expenses for the three and nine months ended July 31, 2012. The valuation was based on the assumptions noted in the following table.

Expected volatility	96.46	%
Expected dividends	0.00	%
Expected term (in years)	3 years
Risk-free rate	1.06	%

The risk-free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant.  The dividend yield on our common stock is assumed to be zero since we do not pay dividends and have no current plans to pay them in the future.  The market price volatility of our common stock was based on historical volatility since December 13, 2009.  Our methodology is consistent with prior period volatility assumptions.  The expected life of the options is based upon our anticipated expectations of exercise behavior since no options have been exercised in the past to provide relevant historical data.

 b) On October 15, 2011, we entered into an independent director agreement with Mr. Pan, who became our director on October 15, 2011. The agreement provides that Mr. Pan, the Chair of our Audit Committee, will receive (i) a fee of $2,500 per month, (ii) options to purchase 50,000 shares of common stock under the 2003 Plan, at an exercise price of $0.80 per share, which is equal to the closing price of the Company’s common stock on October 15, 2011, subject to vesting on a quarterly basis (4,166 shares of option to vest on the first 11 quarter anniversaries of the grant and 4,174 shares of option to vest on the 12th quarter anniversary of the grant with the initial 4,166 shares of option vesting to commence on January 15, 2012), and with all vesting conditional upon continued service as a director of the Company as of each such anniversary; and (iii) a reimbursement of out-of pocket expenses incidental to his services on the Board. The agreement expires on the earlier of (i) the date Mr. Pan ceases to be a member of the board, or (ii) the date of termination of the Agreement.

The fair value of the option award is estimated on the date of grant using the Black-Scholes option valuation model to be $34,042, of which $2,837 and $8,511 were recorded as compensation expenses for the three and nine months ended July 31, 2012.  The valuation was based on the assumptions noted in the following table.

Expected volatility	127.76	%
Expected dividends	0.00	%
Expected term (in years)	3 years
Risk-free rate	1.12	%

The risk-free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant.  The dividend yield on our common stock is assumed to be zero since we do not pay dividends and have no current plans to pay them in the future.  The market price volatility of our common stock was based on historical volatility since October 14, 2010.  Our methodology is consistent with prior period volatility assumptions.  The expected life of the options is based upon our anticipated expectations of exercise behavior since no options have been exercised in the past to provide relevant historical data.

(2)  2007 Non-Qualified Company Stock Grant and Option Plan

On March 19, 2007, our board of directors approved the 2007 Non-Qualified Company Stock Grant and Option Plan (the “2007 Plan”).   The 2007 Plan is intended to serve as an incentive to and to encourage stock ownership by our  directors, officers, and employees, and certain persons rendering service to us, so that such persons may acquire or increase their proprietary interest in our success, and to encourage them to remain in our service.  Under the 2007, up to 200,000 shares of our common stock may be subject to options.

(3)  Option Activity and Status

A summary of option activity and movement during the three and nine months ended at July 31, 2012 and 2011, respectively, are as follow:

	Options		Weighted average exercise price		Aggregate intrinsic value		Weighted average remaining contractual term
For the three months ended July 31, 2012
Outstanding at May 1, 2012		284,998	$	1.96	$	381,886		4.15
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at July 31, 2012		284,998	$	1.96	$	381,886		3.90
For the three months ended July 31, 2011
Outstanding at May 1, 2011		270,000	$	2.26	$	426,083		4.81
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at July 31, 2011		270,000	$	2.26	$	426,083		4.62

	Options		Weighted average exercise price		Aggregate intrinsic value		Weighted average remaining contractual term
For the nine months ended July 31, 2012
Outstanding at November 1, 2011		284,998	$	1.96	$	381,886		4.64
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at July 31, 2012		284,998	$	1.96	$	381,886		3.90
For the nine months ended July 31, 2011
Outstanding at November 1, 2010		70,000	$	2.57	$	166,832		2.45
Granted		200,000		2.15		259,251		5.38
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at July 31, 2011		270,000	$	2.26	$	426,083		4.62

A summary of the status of the Company’s non-vested options as of July 31, 2012 and 2011, respectively, and movements during the three and nine months then ended are as follow:

	Options			Weighted average granted date fair value
For the three months ended July 31, 2012
Non-vested at May 1, 2012		181,668		$	1.60
Granted		-			-
Vested		(4,166	)		0.68
Forfeited or expired		-			-
Non-vested at July 31, 2012		177,502		$	1.17
For the three months ended July 31, 2011
Non-vested at May 1, 2011		240,835		$	2.22
Granted		-			-
Vested		-			-
Forfeited or expired		-			-
Non-vested at July 31, 2011		240,835		$	2.22

	Options			Weighted average granted date fair value
For the nine months ended July 31, 2012
Non-vested at November 1, 2011		250,000		$	1.17
Granted		-			-
Vested		(72,498	)		1.19
Forfeited or expired		-			-
Non-vested at July 31, 2012		177,502		$	1.17
For the nine months ended July 31, 2011
Non-vested at November 1, 2010		58,334		$	2.57
Granted		200,000			2.15
Vested		(17,499	)		2.57
Forfeited or expired		-			-
Non-vested at July 31, 2011		240,835		$	2.22

The unrecognized compensation costs related to non-vested share-based compensation granted under the Company’s option plan were $142,931 and $333,836 on July 31, 2012 and 2011, respectively.

(4) Warrants

A summary of warrant activity and movement during the three and nine months ended at July 31, 2012 and 2011, respectively, are as follow:

	Warrants		Average exercise price
For the three months ended July 31, 2012
Outstanding warrants at May 1, 2012		1,231,428	$	1.03
Warrants granted		-		-
Exercised		-		-
Expired/cancelled		1,071,428		0.88
Outstanding warrants at July 31, 2012		160,000	$	2.00
For the three months ended July 31, 2011
Outstanding warrants at May 1, 2011		1,231,428	$	1.03
Warrants granted		-		-
Exercised		-		-
Expired/cancelled		-		-
Outstanding warrants at July 31, 2011		1,231,428	$	1.03

	Warrants		Average exercise price
For the nine months ended July 31, 2012
Outstanding warrants at November 1, 2011		1,231,428	$	1.03
Warrants granted		-		-
Exercised		-		-
Expired/cancelled		1,071,428		0.88
Outstanding warrants at July 31, 2012		160,000	$	2.00
For the nine months ended July 31, 2011
Outstanding warrants at November 1, 2010		1,231,428	$	1.03
Warrants granted		-		-
Exercised		-		-
Expired/cancelled		-		-
Outstanding warrants at July 31, 2011		1,231,428	$	1.03

Information regarding the warrants outstanding at July 31, 2012 and 2011 are summarized as below:

	Warrants Outstanding		Weighted average  remaining contractual  life(years)		Weighted average exercise price
Warrants outstanding at July 31, 2012		160,000		0.65		2.00
		1,071,428		0.79	$	0.88
		160,000		1.65		2.00
Warrants outstanding at July 31, 2011		1,231,428		0.90	$	1.03