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OPTIONS AND WARRANTS
9 Months Ended
Sep. 30, 2011
Options And Warrants 
OPTIONS AND WARRANTS

NOTE 10 – OPTIONS AND WARRANTS

 

Share-based Compensation:

 

The 2009 Stock Incentive Plan (the “Incentive Plan”) authorizes the issuance of various forms of stock-based awards, including incentive or non-qualified options, restricted stock awards, performance shares and other securities as described in greater detail in the Incentive Plan, to the Company’s employees, officers, directors and consultants.  Options to purchase a total of 5 million shares are authorized to be issued under the Incentive Plan.  As of September 30, 2011, 2 million shares have been granted under this plan.

 

Options

In February 2011, options to purchase an aggregate of 2 million shares were granted to certain named executives and non-executive members of the management team at an exercise price of $0.09 per share.  The options have a ten year term and vested immediately upon the date of grant.  A fair value of $169,369 was recorded using the Black-Scholes option-pricing model.  Variables used in the Black-Scholes option-pricing model for the options issued during the three month period ended September 30, 2011 include (1) discount rate of 3.52%, (2) expected term of 5 years, (3) expected volatility of 369.75%; and (4) zero expected dividends.

 

During the nine month period ended September 30, 2011, the Company recognized share-based compensation expense of $171,997. The remaining amount of unamortized options expense at September 30, 2011 is $-0-.  The intrinsic value of outstanding as well as exercisable options at September 30, 2011 was $-0-.

 

Activity in options during the nine month period ended September 30, 2011 and related balances outstanding as of that date are reflected below:

 

    Number of Shares     Weighted Average Exercise Price     Weighted Average Remaining Contract Term (# years)  
Outstanding at January 1, 2011     2,358,792     $ 0.61        
Granted     2,000,000       0.09        
Exercised     0       0        
Forfeited and cancelled     0       0        
                       
Outstanding at September 30, 2011     4,358,792     $ 0.37       6.1  
                         
Exercisable at September 30, 2011     4,358,792     $ 0.37       6.1  

 

Warrants

 

On February 24, 2011, Blast and a third party lender (the “Investor”) entered into that certain Note Purchase Agreement  which provided that if the Test Well fails to achieve an initial production average of at least 350 barrels of oil equivalent per day for the 30-day period commencing on the first day on which the Test Well is at full production, Blast would issue to the Investor a common stock purchase warrant to purchase up to 12,000,000 shares of Blast’s common stock (the “Warrant”).  The Warrant was subsequently granted in October 2011. The Warrant has a term of two years, and provides for cashless exercise rights in the event the shares of common stock issuable upon exercise of the Warrant are not registered with the Commission. The Warrant further contained various anti-dilution protections and had an exercise price equal to the weighted average of the trading price of Blast’s common stock over the ten day period prior to the grant date.

 

On October 7, 2011, Blast and the Investor amended the Warrant in exchange for certain mutual promises and covenants and for consideration of $30,000 paid by the Investor to Blast. The amendments included that the exercise price shall thereafter be $0.01 per share, and may be further reduced with the previous anti-dilutive protective provisions, but in no event shall it be greater than $0.01 per share, unless certain events occur, including the merger of Blast with an operating company (a “Merger Event”). Further, in the event a Merger Event occurs, the Investor has waived its price-based anti-dilution protection (if Blast sells its securities lower than the exercise price of the warrants) and anti-dilution protection for compensatory issuances (in amounts in excess of 7,000,000 shares of Common Stock).

 

In February 2011, 2,000,000 warrants with an exercise price of $0.10 per share expired without being exercised.

 

On May 18, 2011, Blast agreed with Trident Partners to amend their placement agreement as it pertains to Trident’s 10% share of the royalty offered to the Investor introduced to Blast by Trident. In lieu of a share in the royalty interest and as consideration for entering into the amendment, Blast agreed to grant to certain principals of Trident fully vested warrants, exercisable for two years to purchase up to 400,000 shares of Blast’s common stock at an exercise price of $0.01 per share.

 

The fair value of the warrants granted of $44,528 was expensed during the three months ended June 30, 2011 and the warrants were valued using the Black-Scholes option-pricing model. Variables used in the Black-Scholes pricing model for the 400,000 warrants include: (1) discount rate of 0.42%, (2) expected term of 2 years, (3) expected volatility of 164.80% and (4) zero expected dividends. The warrants vested immediately, have an exercise price of $0.01 per share and are exercisable for a period of two years from the grant date.

 

During the nine month period ended September 30, 2011, the Company recognized share-based compensation expense of $44,528. The remaining amount of unamortized warrant expense at September 30, 2011 was $-0-.  The intrinsic value of outstanding as well as exercisable warrants at September 30, 2011 was $78,204.

 

Activity in warrants during the nine months ended September 30, 2011 and related balances outstanding as of that date are reflected below.

    Number of Shares     Weighted Average Exercise Price     Weighted Average Remaining Contract Term (# years)  
Outstanding at January 1, 2011     12,245,089     $ 0.84        
Granted     400,000       0.01        
Exercised     (750,000 )     0.01        
Expired     (2,000,000 )     0.10        
Forfeited and cancelled     0       0        
                       
Outstanding at September 30, 2011     9,895,089     $ 0.98       1.8  
                         
Exercisable at September 30, 2011     9,895,089     $ 0.98       1.8