NOTES TO FINANCIAL STATEMENTS
NOTE 9 - STOCK OPTIONS (continued)
During the year ended June 30, 2008, the Company issued 100,000 options to one of its executive officers. The exercise price is $0.07, which was the price of the Company's common stock on the grant date. The options are immediately exercisable and expire five years from the grant date. The fair value of the options was estimated at the date of grant using the Black-Scholes option price model. The Company determined that the stock option compensation was $6,845 and was recognized during the year ended June 30, 2008.
During the year ended June 30, 2008, the Company also issued 3,000,000 options to one of its executive officers. The exercise price was $0.10, which is a discount to the price of the Company's common stock price of $.20 on the grant date. The options are immediately exercisable and expire five years from the grant date. The fair value of the options was estimated at the date of grant using the Black-Scholes option price model. The Company determined that the stock option compensation was $576,092 and was recognized during the year ended June 30, 2008.
To determine the fair value of the options granted during the year ended June 30, 2008, the Company used the following assumptions in its Black-Scholes option -price calculation:
Issue date June 30, 2007 January 1, 2008 June 30, 2008
Options issued 500,000 3,000,000 100,000
Risk-free interest rate 5% 3% 3%
Expected option life 5 years 5 years 5 years
Dividend yield 0% 0% 0%
Volatility 120% 157% 194%
Exercise price $0.55 $0.10 $0.07
These assumptions were determined as follows:
· The risk free interest rate for the period within the contractual life of the option is based on the 5-year U.S. Treasury yield at the time of the grant.
· The expected term of the options granted represents the period of time that the options granted are expected to be outstanding.
· Historically, the Company has not paid a dividend on its common shares and does not expect to do so in the future.
· The volatility assumption represents an expectation of the volatility of the price of the underlying shares for the expected term of the option, considering factors such as historical stock price and stock volatility of other companies within the industry.
WATERPURE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - STOCK OPTIONS (continued)
The following is a summary of the status of stock option activity for the period
from inception (July 22, 2005) through December 31, 2008:
Weighted
Average
Exercise
Options Price
Outstanding as of July 22, 2005 (inception) - $ -
Granted 125,000 0.0025
Exercised - -
Forfeited - -
Expired - -
Outstanding as of June 30, 2006 125,000 $ 0.0025
Granted 500,000 0.5500
Exercised - -
Forfeited - -
Expired - -
Outstanding as of June 30, 2007 625,000 $ 0.4400
Granted 3,100,000 0.0990
Exercised 125,000 0.0025
Forfeited - -
Expired - -
Outstanding as of June 30, 2008 3,600,000 $ 0.1610
Granted - -
Exercised - -
Forfeited - -
Expired - -
Outstanding as of December 31, 2008 3,600,000 $ 0.1610
No options were exercised and no funds were received from the exercise of options during the six-month period ended December 31, 2008.
NOTE 10 - RELATED PARTY TRANSACTIONS
LEASE
The Company subleases its office space from Stein, Feldman and Sampson, LLC, of which, Mr. Orr, the Company's Chief Financial Officer is affiliated, for $500 per month on a month-to-month basis.
DUE TO OFFICERS AND STOCKHOLDERS
During the six-months ended December 31, 2008, the Company received advances, made repayments, and had amounts due to officers and stockholders as disclosed in Note 6.
WATERPURE INTERNATIONAL, INC. (A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - INCOME TAXES
The Company adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN No. 48"), on July 1, 2007. FIN No. 48 requires that the impact of tax positions be recognized in the financial statements if they are more likely than not of being sustained upon examination, based on the technical merits of the position. As discussed in the June 30, 2008 financial statements in the Form 10-K, the Company has a valuation allowance against the full amount of its net deferred tax assets. The Company currently provides a valuation allowance against deferred tax assets when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. There was no impact to the Company as a result of adopting FIN No. 48 as the Company's management has determined that the Company has no uncertain tax positions requiring recognition under FIN No. 48 both on July 1, 2007 (adoption) and on December 31, 2008.
The Company is subject to U.S. federal income tax as well as income tax of certain state jurisdictions. The Company has not been audited by the I.R.S. or any states in connection with income taxes. The periods from inception - 2007 remain open to examination by the I.R.S. and state authorities.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense. Penalties, if incurred, are recognized as a component of tax expense.
NOTE 12 - SUBSEQUENT EVENTS
Subsequent to December 31, 2008, the Company at various times sold 2,999,999 shares of its common stock for $22,500. The fair value of the shares was determined based on the closing price of the shares at the date of the agreements.
Subsequent to December 31, 2008, the Company at various times issued 6,550,000 shares of its common stock for consulting services totaling $65,500.
source : MarketWatch
