4. Common Stock

9 Months Ended

Oct. 31, 2011

The Company is authorized to issue common stock of up to 100,000,000 shares, with a par value of $0.001 and up to 100,000,000 shares of preferred stock, with a par value of $0.001. The preferred shares entitle the holder to payment as a preferred creditor in the case of corporate default.

During the nine month period ended October 31, 2011, the Company issued the following shares of common stock:

	a)	1,900,000 shares of common stock at a fair value of $247,000 as a commencement bonus for consulting services from a third party, which had been recorded in obligation to issue shares at January 31, 2011.
	b)	900,000 shares of common stock for gross proceeds of $90,000, which was recorded in subscriptions received at January 31, 2011.
	c)	428,571 shares of common stock for gross proceeds of $30,000.
	d)	300,000 shares of common stock to settle debt of CAD $22,500 or USD $23,866 with the President of the Company. The shares of common stock were issued at a fair value of $23,866.
	e)	600,000 shares of common stock to settle debt of $60,000 to a third party consultant. The shares were issued at a fair value of $54,000. The Company recorded a gain on settlement of debt of $6,000.
	f)	813,008 shares of common stocks to settle accounts payable and accrued liabilities (Note 7). The shares were issued at a market value of $100,000.
	g)	50,000 shares of common stock for gross proceeds of $8,500, which were recorded in subscriptions received at July 31, 2011.
	h)	1,500,000 shares of common stock to settle debt of $100,000 to third party consultants.

At October 31, 2011, the Company has $16,747 (January 30, 2011 - $115,247) in subscriptions received. These subscriptions are comprised of advances towards a private placement of shares of common stock ranging from $0.10 to $0.17 per share.

At January 31, 2011, the Company has recorded $188,192 in deferred compensation, which represents the issuance of shares of common stock for consulting services. During the period ended October 31, 2011, the company recorded $188,192 from deferred compensation to general and administrative expenses.

Stock Options

The following are the assumptions used for the Black-Scholes option pricing model to record the fair value of the issued stock options:

	a)	The Company calculated volatility for stock options and awards using historical volatility.
	b)	The Company used a 0% forfeiture rate and the Company does not consider forfeitures to be material.
	c)	The Company has not, and does not intend to issue dividends, therefore, the dividend yield assumption is 0%.
	d)	The risk-free rate for the expected term of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant.

On January 31, 2010, the Company issued 500,000 stock options to the President of the Company, pursuant to the Company’s stock option plan. These options are exercisable at a price of $0.18 for a period of five years. The company recognizes stock-based compensation costs over the requisite service period of the award, which is the option vesting term. The options vest at a rate of 20% per year, commencing January 31, 2010. The fair value of these options at the date of grant was estimated to the $68,006 using the Black-Scholes option pricing model with an expected life of 5 years, a risk-free interest rate of 2.34%, a dividend yield of 0%, and expected volatility of 101%. These stock options expire on January 31, 2014. To October 31, 2011, 200,000 of these stock options are exercisable and the Company recognized $6,800 (January 31, 2011 - $13,600) in stock-based compensation expense in relation to these vested stock options, of which $3,400 was allocated to management fees and $3,400 was allocated to research and development costs.

On April 18, 2011, the Company issued 1,000,000 stock options to a third party consultant. These options are exercisable at a price of $0.07 for a period of 60 days. The Company recognizes stock-based compensation costs over the requisite service period of the award, which is 60 days. The market value of these options at the date of grant was estimated to be $52,015 using the Black-Scholes option pricing model with an expected life of 60 days, a risk-free interest rate of 1%, a dividend yield of 0%, and expected volatility of 105.59%. To October 31, 2011, 1,000,000 of these stock options are exercisable and the Company recognized $52,015 (January 31, 2011 - $Nil) in stock-based compensation expense in relation to these stock options, of which $52,015 was allocated to consulting fees in general and administrative expenses. These stock options expired, unexercised, on June 20, 2011.

Stock option transactions during the nine months ended October 31, 2011 were as follows:


Balance, January 31, 2010 and 2011	504,000
Granted	1,000,000
Expired	(1,004,000	)
Balance, October 31, 2011 – Outstanding	500,000
Balance, October 31, 2011 - Exercisable	500,000

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 2: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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Reference 14: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=6521494

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+ Details

COMPASS BIOTECHNOLOGIES INC. 10-Q