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Equity
9 Months Ended
Sep. 30, 2011
Notes to Financial Statements 
Equity

4. EQUITY

 

On March 17, 2010, John C. Kinard, a member of the Company's Board of

Directors, was issued options to purchase 70,000 shares of the Company's

common stock under the 2006 Stock Incentive Plan at a strike price of $0.25

per share. The options immediately vested and expire after ten years. The

Company recorded an expense of $16,380 for the options. Fair values

were estimated at the date of grant of the options, using the Black-Scholes

Option Valuation Model with the following weighted average assumptions:

risk free interest rate of 3.65%, volatility factor of the expected market

price of the Company's common stock of 162%, no dividend yield, and a weighted

average expected life of the options of 5 years. For the purpose of

determining the expected life of the options, the Company utilizes the

Simplified Method as defined in Staff Accounting Bulletin No. 107 issued by

the SEC.

 

On September 9, 2010, Alfred H. Pekarek, a consulting geologist to the Company

was issued options to purchase 50,000 shares of the Company's common stock

under the 2006 Stock Incentive Plan at a strike price of $0.26 per share. The

options immediately vested and expire after ten (10) years. The Company

recorded an expense of $11,700 for the options. Fair values were estimated at

the date of grant of the options, using the Black-Scholes Option Valuation

Model with the following weighted average assumptions: risk free interest

rate of 2.77%, volatility factor of the expected market price of the Company's

common stock of 142%, no dividend yield, and a weighted average expected life

of the options of 5 years. For the purpose of determining the expected life

of the options, the Company utilizes the Simplified Method as defined in Staff

Accounting Bulletin No. 107 issued by the SEC.

 

On February 28, 2011, Kevin R. Seth, the newest member of the Company's Board

of Directors, was issued options to purchase 150,000 shares of the Company's

common stock under the 2006 Stock Incentive Plan at a strike price of $0.10

per share. The options immediately vested and expire after ten years. The

Company recorded an expense of $11,295 for the options. Fair values

were estimated at the date of grant of the options, using the Black-Scholes

Option Valuation Model with the following weighted average assumptions:

risk free interest rate of 3.42%, volatility factor of the expected market

price of the Company's common stock of 172%, no dividend yield, and a weighted

average expected life of the options of 5 years. For the purpose of

determining the expected life of the options, the Company utilizes the

Simplified Method as defined in Staff Accounting Bulletin No. 107 issued by

the SEC.

 

Diluted EPS (Earnings per Share) gives effect to all dilutive potential common

shares outstanding during the period. The computation of Diluted EPS does not

assume conversion, exercise or contingent exercise of securities that would

have an anti-dilutive effect on losses. As a result, if there is a loss from

continuing operations, Diluted EPS is computed in the same manner as Basic

EPS. At September 30, 2011, the Company had 1,245,000 options and 2,222,226

warrants outstanding, that were not included in the calculation of earnings

per share for the period then ended. Such financial instruments may become

dilutive and would then need to be included in future calculations of Diluted

EPS. At September 30, 2011, the outstanding options and warrants were

considered anti-dilutive since the strike prices were above the market price

and since the Company has incurred losses year to date.

 

In January 2010, the Company received stock subscriptions of $285,000 as a

part of its then ongoing private placement offering, which concluded on

January 26, 2010. The subscribers received 4,071,428 shares of stock valued

at $.07 per share. Subsequent to the private placement, the Company

determined that it needed to enter into the farm-in agreement and raise

additional funds in order to drill the 2-12 well on the Gabbs Valley

Prospect.

 

In July 2010, the Company completed its most recent private placement offering

by issuing 4,444,446 shares of common stock, with an aggregate purchase price of

$400,000 and 2,222,226 warrants to purchase shares of common stock at a price of

$.50, which were set to expire in June and July, 2011, however they have been

extended to December 31, 2011. Fair values of the extended warrants were

estimated at the date of extension using the Black-Scholes Option Valuation

Model with the following weighted average assumptions: risk free interest

rate of .09%, volatility factor of the expected market price of the Company's

common stock of 200%, no dividend yield, and a weighted average expected life

of the warrants of 6 months. The outstanding warrants were valued at $17,778,

which had no income statement effect. Proceeds from the private placement

were utilized for the Company's share of costs to drill the 2-12 well on the

Gabbs Valley Prospect (See Note 2).

 

Proceeds of the June-July 2010 private placement were allocated $101,250 to

common stock warrants and $298,750 to common stock and paid in capital. The

value of the warrants was estimated using the Black-Scholes Valuation Model

with the following weighted average assumptions: risk free interest rate of

.30%, no dividend yield, volatility factor of the expected market price of the

Company's common stock of 157%, and a weighted average expected life of the

warrants of one year.

 

On August 24, 2011, Albert E. Whitehead, the Company’s Chief Executive Officer,

was issued 2,000,000 shares of the Company’s common stock for a purchase price

of $.05 per share for a total investment of $100,000.