See accompanying notes to financial statements.
Moggle, Inc.
(A Development Stage Company)
Notes to Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business
The Company is a development stage enterprise incorporated in the state of Delaware on February 11, 2008. Since inception, the Company has concentrated its efforts on developing a business plan which was designed to allow it to create the massive multiplayer online gaming platform (the “Platform”) and massive multiplayer online games (“MMOGs”) for use on its Platform. Those activities included, but were not limited to, securing initial capital in order to fund the development of a demonstration model for portions of the Platform and working capital, securing a board of directors, management personnel and consultants who the Company believes will assist in developing the Platform and meet the business goals, conducting market research regarding the MMOG industry and the Platform and planned MMOGs, and other pre-marketing activities. Recently, in light of the Company’s belief that increased market interest towards the security aspects of online gaming and social networking have emerged, the Company has refocused its efforts towards delivering a platform technology designed to manage the under 17 age group’s online experience in a secure manner. The Company is attempting to develop and introduce to the marketplace over the next 12 months two U17 security management products: Virtual Piggy and Parent Match.
Virtual Piggy will be designed to provide an online Piggy Bank security service that allows parents to setup and control their children’s spending online. Parents and guardians will be able to determine who is allowed to contribute to their child’s account as well as providing notification mechanisms back to the contributors when the funds are spent. The parent can establish how much a child can spend in a single transaction and how much they can spend over time. The Virtual Piggy service tracks all spending and the parent can receive alerts and reports on spending patterns. A third-party site would prompt a child to enter their VirtualPiggy ID – when they attempt to make a transaction. This ID along with category, pricing and descriptive information about the purchase would be sent to the VirtualPiggy webservice. Based on the rules set out by the parent, VirtualPiggy would send back a Yes/No signal to the requesting service and either allow or prohibit the transaction.
ParentMatch, and its companion product, ParentPlayback, will be designed to provide the parent/guardian with a higher level of control than is currently provided by ‘nanny’ type services. In addition the ID follows the child whenever they are on a computer as opposed to traditional controls which are resident on a PC by PC basis. ParentMatch provides filtering for the parent to be able to control such areas as (i) sites a child may access; (ii) types of content they may view and (iii) who they can interact with online. ParentPlayback will provide the parent with a video transcript of their child’s online session. Since inception, substantially all of the efforts of the Company have been developing technologies for multiplayer online role playing games and the Virtual Piggy, ParentMatch and ParentPlayback platforms. The Company is in the development stage of raising capital, financial planning, establishing sources of supply, and acquiring property and equipment. The Company anticipates establishing global markets for its technologies.
Basis of Presentation
The financial statements are presented in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 915 for development stage entities. The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission. Operating results for the three months ended March 31, 20110 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011.
Moggle, Inc.
(A Development Stage Company)
Notes to Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Comprehensive Income
The Company follows FASB ASC 220 in reporting comprehensive income. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Since the Company has no items of other comprehensive income (loss), comprehensive income (loss) is equal to net income (loss).
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, accounts receivable and accounts payable. The carrying value of cash, accounts receivable and accounts payable approximate fair value, because of their short maturity.
Concentration of Credit Risk Involving Cash
The Company may have deposits with a financial institution which at times exceed Federal Depository Insurance coverage of $250,000.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and certificates of deposit and commercial paper with original maturities of 90 days or less to be cash or cash equivalents.
Revenue Recognition
In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition (Codified in FASB ASC 605), the Company will recognize revenue when (i) persuasive evidence of a customer or distributor arrangement exists or acceptance occurs, (ii) a retailer, distributor or wholesaler receives the goods, (iii) the price is fixed or determinable, and (iv) collectibility of the sales revenues is reasonably assured. Subject to these criteria, the Company will generally recognize revenue from Virtual Piggy and Virtual Parent at the time of the sale of the associated product and will recognize revenue from the sale of role playing games when shipped.
Income Taxes
The Company follows FASB ASC 740 when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Tax years from 2008 through 2010 remain subject to examination by major tax jurisdictions.
Loss Per Share
The Company follows FASB ASC 260 when reporting Earnings Per Share resulting in the presentation of basic and diluted earnings per share. Because the Company reported a net loss for three months ended March 31, 2011 and 2010, common stock equivalents, including stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same.
Moggle, Inc.
(A Development Stage Company)
Notes to Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Start-up Costs
In accordance with FASB ASC 720, start-up costs are expensed as incurred.
Research and Development Costs
In accordance with FASB ASC 730, research and development costs are expensed when incurred.
Recently Issued Accounting Pronouncements Not Yet Adopted
As of March 31, 2011, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements.
Recently Adopted Accounting Pronouncements
In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310). This update requires new disclosures and enhances current disclosures about the allowance for credit losses and the credit quality of financing receivables. However, the following receivables are excluded from the scope of this amendment: receivables measured at fair value with changes included in earnings and receivables measured at lower of cost or market and trade receivables with contractual maturities of one year or less that arose from the sale of goods or services. This standard is effective for interim and annual periods ending on or after December 15, 2010. The Company adopted the disclosure requirements effective January 1, 2011.
In January 2010, FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This update provides amendments to ASC Topic 820 that provide disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company adopted the disclosure requirements effective January 1, 2011.
In December 2010, FASB issued ASU No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments in this Update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company will adopt the disclosure requirements for any business combinations in 2011.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses and experienced negative cash flow from operations during the development stage. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company is in the development stage at March 31, 2011. Successful completion of the Company’s development program and ultimately, the attainment of profitable operations is dependent upon future events, including obtaining adequate financing to fulfill its development activities and achieving a level of sales adequate to support the Company’s cost structure. However, there can be no assurances that the Company will be able to secure additional equity investment or achieve an adequate sales level.
(A Development Stage Company)
Notes to Financial Statements
NOTE 3 – NOTES PAYABLE
On February 3, 2010 the manager of corporate development loaned the Company $20,000 in return for a promissory note with an interest rate of 4.5% in the same amount. The promissory note was paid in full on April 19, 2010.
On May 20, 2010 the Company issued a promissory note to an investor in the amount of $22,500 with an interest rate of 6% in return for a loan of the same amount. The promissory note also required that the Company issue 33,750 shares of the Company’s common stock to the investor. The fair value of the common stock was $30,228 and was recorded as a discount to the note payable, with the excess recorded as a deferred cost, in accordance with FASB ASC 835-30-25 Interest. The note was repaid on August 12, 2010 and interest was fully accreted on the note payable in the amount of $22,500 as of August 12, 2010 and the deferred costs of $7,728 were fully amortized as of August 12, 2010.
On June 30, 2010 the Company issued a promissory note to a third party in the amount of $100,000 with an interest rate of 6% in return for a loan of the same amount. The promissory note also required that the Company issue 150,000 shares of the Company’s common stock to the third party. The fair value of the common stock was $146,495 and was recorded as a discount to the note payable, with the excess recorded as a deferred cost, in accordance with FASB ASC 835-30-25 Interest. The note was repaid on August 18, 2010 and interest was accreted on the note payable in the amount of $100,000 as of August 18, 2010 and the deferred costs of $46,495 were fully amortized as of August 18, 2010.
On July 16, 2010 the Company issued a promissory note to a third party in the amount of $25,000 with an interest rate of 6% in return for a loan of the same amount. The promissory note also required that the Company issue 37,500 shares of the Company’s common stock to the third party. The fair value of the common stock was $33,681 and was recorded as a discount to the note payable, with the excess recorded as a deferred cost, in accordance with FASB ASC 835-30-25 Interest. The note was assumed by a third party who, on November 1, 2010, converted the note payable into 125,000 shares of common stock at $.20 per share, fair value. Interest was fully accreted on the note payable in the amount of $25,000 as of November 1, 2010 and the deferred costs of $8,681 were fully amortized as of November 1, 2010.
On August 4, 2010 the Company issued a promissory note to a third party in the amount of $50,000 with an interest rate of 6% in return for a loan of the same amount. The promissory note also required that the Company issue 75,000 shares of the Company’s common stock to the third party. The fair value of the common stock was $54,509 and was recorded as a discount to the note payable, with the excess recorded as a deferred cost, in accordance with FASB ASC 835-30-25 Interest The note was assumed by a third party who, on November 1, 2010, converted the note payable into 250,000 shares of common stock at $.20 per share, fair value. Interest was fully accreted on the note payable in the amount of $50,000 as of November 1, 2010 and the deferred costs of $4,509 were fully amortized as of November 1, 2010.
On August 6, 2010 the Company issued a promissory note to a third party in the amount of $125,000 with an interest rate of 6% in return for a loan of the same amount. The promissory note also required that the Company issue 187,500 shares of the Company’s common stock to the third party. The fair value of the common stock was $135,831 and was recorded as a discount to the note payable, with the excess recorded as a deferred cost, in accordance with FASB ASC 835-30-25 Interest. The note was repaid on August 18, 2010. Interest was fully accreted on the note payable in the amount of $125,000 as of August 18, 2010 and the deferred costs of $10,831 were fully amortized as of August 18, 2010.
(A Development Stage Company)
Notes to Financial Statements
NOTE 4 - INCOME TAXES
Income tax expense was $0 for the three months ended March 31, 2011 and 2010.
As of January 1, 2011, the Company had no unrecognized tax benefits, and accordingly, we have not recognized interest or penalties during 2011 related to unrecognized tax benefits. There has been no change in unrecognized tax benefits during the three months ended March 31, 2011, and there was no accrual for uncertain tax positions as of March 31, 2011. Tax years from 2008 through 2010 remain subject to examination by major tax jurisdictions.
There is no income tax benefit for the losses for the three months ended March 31, 2011 and 2010, since management has determined that the realization of the net tax deferred asset is not assured and has created a valuation allowance for the entire amount of such benefits.
NOTE 5 – STOCKHOLDERS’ EQUITY
In February 2008, the Company issued 19,000,000 founders shares at $.001 per share or $19,000.
In February 2008, the Company commenced a private placement of up to 7 million units at a price of $.035 per unit to accredited investors. One unit consists of one share of the Company’s common stock and two warrants. Each warrant entitles the holder to purchase one additional share of common stock at a price of $.04 per share and is exercisable for a three year period. From February through June 2008, 7,142,858 units were sold, raising $250,000 in proceeds and resulting in 14,285,716 warrants being issued.
On May 8, 2008, 500,000 options were exercised, which raised proceeds $20,000. During the three months ended September 30, 2008, 1,750,000 options were exercised, which raised proceeds of $70,000.
On May 27, 2008, the Company commenced a private placement of up to 6 million units at a price of $.035 per unit to accredited investors. One unit consists of one share of the Company’s common stock and one warrant. Ten of these warrants entitle the holder to purchase one additional share of common stock at a price of $.75 per share and is exercisable for a three year period. During the three months ended June 30, 2008, 6,142,858 units were sold with warrants exercisable at a price of $.75 per share, raising $215,000 in proceeds and resulting in 614,286 warrants being issued. During the three months ended September 30, 2008 500,000 units were sold with warrants at a price of $.75, raising $17,500 and resulting in 50,000 warrants being issued.
During the three months ended September 30, 2008, the Company sold 2,560 shares, which raised proceeds of $2,560. The Company filed a registration statement to register 2,560 shares of the Company, which became effective on September 3, 2008.
During the three months ended September 30, 2008, 250,000 warrants were exercised, which raised proceeds of $10,000.
During the three months ended March 31, 2009, 1 million options were exercised, which raised proceeds of $40,000.
During the three months ended March 31, 2009, the Company issued 100,000 shares of common stock, which were valued at the fair market value of $200,000 for consulting services.
During the three months ended June 30, 2009, the Company sold 400,000 shares, which raised proceeds of $348,000, net of commissions of $52,000.
During the three months ended September 30, 2009, 1 million warrants and 1.5 million options were exercised, which raised proceeds of $100,000. In addition, the Company sold 100,000 shares, which raised proceeds of $87,000, net of commissions of $13,000.
(A Development Stage Company)
Notes to Financial Statements
NOTE 5 – STOCKHOLDERS’ EQUITY (Continued)
On October 9, 2009, the Company was listed on the German stock exchange. As a result the Company was required to issue 1,080,427 shares of common stock under a consulting agreement. These shares were valued at the fair market value of $1,080,427.
On October 21, 2009, the Company sold 100,000 shares to an investor, which raised proceeds of $100,000.
On October 22, 2009, an investor exercised 1,000,000 warrants which raised proceeds of $40,000.
On December 2, 2009, two investors exercised 500,000 warrants each (total of 1,000,000 warrants), which raised total proceeds of $40,000.
On December 10, 2009 and December 31, 2009 an investor exercised 250,000 options and 1,000,000 warrants respectively, which raised total proceeds of $50,000.
On January 5, 2010 an investor exercised 1,000,000 options, which raised proceeds of $40,000.
On February 22, 2010 an investor exercised 892,858 warrants, which raised proceeds of $35,714.
On March 5, 2010 an investor exercised 500,000 warrants, which raised proceeds of $20,000.
On March 8, 2010 an investor exercised 500,000 warrants, which raised proceeds of $20,000.
On April 13, 2010 an investor exercised 1,000,000 warrants, which raised proceeds of $40,000.
On April 16, 2010 an investor exercised 1,500,000 warrants, which raised proceeds of $60,000.
In August 2010, the Company retired 400,000 non-employee options with exercise prices of $.04 in exchange for the issuance of 65,000 shares to the option holders. No additional compensation expense was recorded as the fair value of the options exceeded the value of the stock that was issued.
On August 17, 2010, the Company sold 2,000,000 shares of common stock to investors, which raised proceeds of $400,000.
During November and December 2010, the Company sold 7,625,000 shares of common stock to investors, which raised proceeds of $1,525,000.
On November 19, 2010, the Company issued 111,111 shares of common stock , which were valued at the fair market value of $100,000, for consulting services.
On December 2, 2010, an investor exercised 3 million options, which raised proceeds of $120,000.
In December 2010, two investors exercised a total of 2.5 million warrants, which raised proceeds of $100,000.
(A Development Stage Company)
Notes to Financial Statements
NOTE 6 – STOCK OPTIONS AND WARRANTS
During 2008, the Board of Directors (“Board”) of the Company adopted an Equity Incentive Plan (“Plan”). Under the Plan, the Company is authorized to grant options to purchase up to 25,000,000 shares of common stock to any officer, other employee or director of, or any consultant or other independent contractor who provides services to the Company. The Plan is intended to permit stock options granted to employees under the Plan to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the Plan, which are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options (“Non-Statutory Stock Options”). As of December 31, 2010, 7,445,000 options have been issued and are unexercised, and 8,555,000 options that are available to be issued under the Plan. Of the 7,445,000 options that have been issued and are unexercised, 1,100,000 options were granted to employees and 6,345,000 options were granted to non employees.
The Plan is administered by the Board, which determines the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the terms of the Plan.
In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company).
Volatility in all instances presented is the Company’s estimate of volatility that is based on the volatility of other public companies that are in closely related industries to Moggle, Inc.
During 2008, the Company issued the Secretary of the Company 500,000 options, which were valued at $8,825 and expensed immediately. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 51.8%, risk free interest rate of 2.5% and expected option life of 5 years. The options expire five years from the date of issuance.
During 2008, the Company entered into an employment agreement with its President and Chief Executive Officer, whereby, the President and Chief Executive Officer was issued 1,000,000 options, which were valued at $71,871 and expensed immediately. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 51.8%, risk free interest rate of 3.3% and expected option life of 5 years. The options expire five years from the date of issuance.
During 2008, the Company entered into an employment agreement with its Director of Corporate Development whereby, the Director of Corporate Development was issued 2,750,000 options, which were valued at $197,645 and expensed immediately. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 51.8%, risk free interest rate of 3.3% and expected option life of 5 years. The options expire five years from the date of issuance.
During 2008, the Company entered into an agreement with a member of the Company’s Board of Directors whereby, the member of the Board of Directors was issued 1,250,000 options, which were valued at $89,838 and expensed immediately. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 51.8%, risk free interest rate of 3.3% and expected option life of 5 years. The options expire five years from the date of issuance.
(A Development Stage Company)
Notes to Financial Statements
NOTE 6 – STOCK OPTIONS AND WARRANTS (Continued)
On June 23, 2008, 500,000 options were issued to a member of the Board of Directors, which were valued at $36,113 and expensed immediately. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 51.8%, risk free interest rate of 3.7% and expected option life of 5 years. The options expire five years from the date of issuance.
On March 12, 2010 the Company entered into a three year employment agreement with the Senior Vice President of Marketing and Licensing for €150,000 annually. The agreement also includes an option to purchase 2 million warrants at $1.00 per share. These options were valued at $1,829,756. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 41.6%, risk free interest rate of 2.4% and expected option life of five years. The options expire five years from the date of issuance. Options granted under the agreements are expensed when the related service is provided. In December 2010, this employment agreement was terminated, the options were terminated and any expense relative to the options that was previously recorded was reversed.
During November 2010, the Company issued two directors options to purchase an aggregate of 600,000 shares of the Company’s common stock at $.90 per share. These options have been valued at $5,207. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 40.8%, risk free interest rate of 1.5% and expected option life of five years. The options expire five years from the date of issuance. Options granted are expensed when the service is provided.
In 2008, the Company issued 14,950,002 warrants as part of the units included in the private placements, which were to expire three years from the date of issuance. The expiration date for unexpired and unexercised warrants was extended on January 24, 2011 to six years from the date of issuance. As of January 24, 2011, there were two directors that had in total, warrants to purchase 3,142,858 shares of the Company’s common stock at $.04 per share and warrants to purchase 100,000 shares of the Company’s common stock at $.75 per share. The warrants to purchase 3,242,858 shares of the Company’s common stock were reclassified from non-employee warrants to incentive stock warrants, because the recipients had become directors subsequent to the date of original issuance. These warrants were revalued and the incremental cost charged to expense was $16,733. There were also seven consultants that had in total warrants to purchase 564,286 shares of the Company’s common stock at $.75 per share. These warrants were revalued and the incremental cost charged to expense was $71,868. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 32.3%, risk free interest rate of 1.05% and expected warrant life of 3 to 3.5 years. The warrants expire 6 years from date of original issuance. The incremental fair value of the warrants was expensed immediately.
For the three months ended March 31, 2011 and 2010, the Company expensed $16,733 and $31,152 relative to employee options/warrants granted. As of March 31, 2011, there was no unrecognized compensation expense related to non-vested market-based share awards.
(A Development Stage Company)
Notes to Financial Statements
NOTE 6 – STOCK OPTIONS AND WARRANTS (Continued)
A summary of incentive stock option/warrant transactions for employees from February 11, 2008 (date of inception) to March 31, 2011 is as follows:
| | | | | | | | | Weighted Average | |
| | | Option/Warrants | | | Exercise | | | Exercise | |
| | | Shares | | | Price | | | Price | |
| Outstanding, February 11, 2008 (Date of Inception) | | | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| Granted | | | 6,000,000 | | | | 0.04 | | | | 0.04 | |
| Exercised | | | (1,750,000 | ) | | | 0.04 | | | | 0.04 | |
| Expired | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Outstanding, December 31, 2008 | | | 4,250,000 | | | $ | 0.04 | | | $ | 0.04 | |
| | | | | | | | | | | | | |
| Granted | | | - | | | | - | | | | - | |
| Exercised | | | (2,750,000 | ) | | | 0.04 | | | | 0.04 | |
| Expired | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Outstanding, December 31, 2009 | | | 1,500,000 | | | $ | 0.04 | | | $ | 0.04 | |
| | | | | | | | | | | | | |
| Granted | | | 2,600,000 | | | .90 to 1.00 | | | | 0.83 | |
| Exercised | | | (1,000,000 | ) | | | 0.04 | | | | 0.04 | |
| Terminated | | | (2,000,000 | ) | | | 1.00 | | | | 1.00 | |
| | | | | | | | | | | | | |
| Outstanding, December 31, 2010 | | | 1,100,000 | | | $ | .04 to .90 | | | $ | 0.51 | |
| | | | | | | | | | | | | |
| Granted | | | - | | | $ | - | | | $ | - | |
| Reclassified | | | 3,242,858 | | | .04 to .75 | | | | 0.05 | |
| Exercised | | | - | | | | - | | | | - | |
| Expired | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Outstanding, March 31, 2011 | | | 4,342,858 | | | $ | .04 to .90 | | | $ | 0.18 | |
| | | | | | | | | | | | | |
| Exercisable, March 31, 2011 | | | 4,342,858 | | | $ | .04 to $.90 | | | $ | 0.18 | |
| | | | | | | | | | | | | |
| Weighted Average Remaining Life, | | | | | | | | | | | | |
| Exercisable, March 31, 2011 (years) | | | 3.1 | | | | | | | | | |
On August 18, 2009, 100,000 options were issued to a consultant, which were valued at $30,689. Another consultant also received 25,000 options on August 18, 2009, which were valued at $7,672. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 58.3%, risk free interest rate of 2.4% and expected option life of 5 years. The options expire five years from the date of issuance. Options granted under the agreements are expensed when the related service or product is provided.
(A Development Stage Company)
Notes to Financial Statements
NOTE 6 – STOCK OPTIONS AND WARRANTS (Continued)
On August 20, 2010 the Company issued the Chief Financial Officer an option to purchase 250,000 shares of the Company’s common stock at $.75 per share. These options have been valued at $2,012. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 36.7%, risk free interest rate of 1.5% and expected option life of five years. The options expire five years from the date of issuance. Options granted are expensed when the service is provided.
On September 13, 2010 the Company issued the Chief Executive Officer an option to purchase 250,000 shares of the Company’s common stock at $.75 per share. These options have been valued at $1,676. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 35.2%, risk free interest rate of 1.5% and expected option life of five years. The options expire five years from the date of issuance. Options granted are expensed when the service is provided.
On September 13, 2010 the Company issued a consultant an option to purchase 100,000 shares of the Company’s common stock at $.75 per share. These options have been valued at $670. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 35.2%, risk free interest rate of 1.5% and expected option life of five years. The options expire five years from the date of issuance. Options granted are expensed when the service is provided.
During October and November 2010, the Company issued various consultant option to purchase an aggregate of1,020,000 shares of the Company’s common stock at $.75, $.78 and $.90 per share. These options have been valued at $7,397. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 34.2% to 40.8%, risk free interest rate of 1.1% to 1.5% and expected option life of five years. The options expire five years from the date of issuance. Options granted are expensed when the service is provided.
On January 24, 2011 the Company issued four consultants options to purchase a total of 230,000 shares of the Company’s common stock at $1.00 per share. These options have been valued at $46,019. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 33.5%, risk free interest rate of 2.03% and expected option life of five years. The options expire five years from the date of issuance. Options granted are expensed when the service is provided.
For the three months ended March 31, 2011 and 2010, the Company expensed $46,125 and $4,829 relative to non employee options granted. As of March 31, 2011, there was $3,041 of unrecognized compensation expense related to non-vested market-based share awards.
(A Development Stage Company)
Notes to Financial Statements
NOTE 6 – STOCK OPTIONS AND WARRANTS (Continued)
The following table summarizes non-employee stock option/warrant of the Company from February 11, 2008 (date of inception) to March 31, 2011 as follows:
| | | | | | | | | Weighted Average | |
| | | Option/Warrant | | | Exercise | | | Exercise | |
| | | Shares | | | Price | | | Price | |
| Outstanding, February 11, 2008 (Date of Inception | | | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| Granted | | | 23,450,002 | | | .04 to .75 | | | | 0.07 | |
| Exercised | | | (750,000 | ) | | | 0.04 | | | | 0.04 | |
| Expired | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Outstanding, December 31, 2008 | | | 22,700,002 | | | $ | .04 to $.75 | | | $ | 0.07 | |
| | | | | | | | | | | | | |
| Granted | | | 125,000 | | | | 2.30 | | | | 0.01 | |
| Exercised | | | (4,000,000 | ) | | | 0.04 | | | | 0.04 | |
| Expired | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Outstanding, December 31, 2009 | | | 18,825,002 | | | $ | 0.04 to $2.30 | | | $ | 0.09 | |
| | | | | | | | | | | | | |
| Granted | | | 1,620,000 | | | .75 to .90 | | | | 0.13 | |
| Exercised | | | (9,892,858 | ) | | | 0.04 | | | | 0.04 | |
| Retired | | | (400,000 | ) | | | 0.04 | | | | 0.04 | |
| | | | | | | | | | | | | |
| Outstanding, December 31, 2010 | | | 10,152,144 | | | $ | 0.04 to $2.30 | | | $ | 0.25 | |
| | | | | | | | | | | | | |
| Granted | | | 230,000 | | | $ | 1.00 | | | $ | 0.03 | |
| Reclassified | | | (3,242,858 | ) | | .04 to .75 | | | $ | .04 to $.75 | |
| Exercised | | | - | | | | - | | | | - | |
| Expired | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Outstanding, March 31, 2011 | | | 7,139,286 | | | $ | .04 to $2.30 | | | $ | 0.36 | |
| | | | | | | | | | | | | |
| Exercisable, March 31, 2011 | | | 7,139,286 | | | $ | 0.04 to $2.30 | | | $ | 0.36 | |
| | | | | | | | | | | | | |
| Weighted Average Remaining Life, | | | | | | | | | | | | |
| Exercisable, March 31, 2011 (years) | | | 2.7 | | | | | | | | | |
NOTE 7 – OPERATING LEASES
For the three months ended March 31, 2011 and 2010 total rent expense under leases amounted to $8,603 and $8,530. At March 31, 2011, the Company was obligated under various non-cancelable operating lease arrangements for offices as follows:
