NOTE 9. STOCKHOLDERS’ DEFICIT

 

Shares Authorized

 

The Company’s authorized capital consists of 1,000,000 shares of preferred stock, par value $0.25, and 2,000,000,000 shares of common stock, par value of $0.00001. As of March 31, 2012, there were zero shares of preferred stock issued and outstanding and 85,031,557 shares of common stock issued and outstanding.

 

Common Stock

 

BluFlow was incorporated on October 14, 2010, with the issuance of 60,000,000 shares of common stock at $0.00033 per share to two investors and the issuance of 300,000 Units at $0.033 per Unit to one investor for total proceeds of $30,000. A Unit equals one share of common stock and a Series C Warrants to purchase one-half share of common stock at an exercise price of $0.16 per share, with an exercise period commencing January 1, 2011 and expiring on December 31, 2012. The portion of the Unit proceeds allocated to common stock and warrants was $8,308 and $1,692, respectively, and was determined using the Black-Scholes model as described below.

 

From November 2010 through May 2011, we conducted a private placement of up to 60,000,000 units of its securities at a price of $0.033 per unit. Each unit consisted of one share of common stock, $0.00001 par value per share and one-half of one Series C Warrant. Each Series C Warrant entitled the holder to purchase one additional share of common stock at a an exercise price of $0.16 per share, expiring on December 31, 2012. As of the termination date of the Offering, we sold 8,865,000 units for gross receipts of $295,500. The Company issued 8,865,000 shares of its common stock and Series C Warrants to purchase up to 4,432,500 shares of common stock at an exercise price of $0.16 per share to the investors having subscribed for the units. The portion of the proceeds allocated to common stock and warrants was $194,460 and $101,040, respectively, and was determined using the Black-Scholes model as described below.

 

On December 15, 2011, we completed a subscription agreement for the sale of 1,500,000 shares of common stock at $0.033 per share for total proceeds of $50,000. This offering was exempt from registration pursuant to the provisions of Section 4(2) of the Securities Act of 1933, as amended (“the 1933 Act”) and Regulation D as promulgated by the SEC under the 1933 Act.

 

On February 13, 2012, the Company began offering for sale up to 15,000,000 units of its securities on a best efforts basis no with minimum at a price of $0.20 per unit ($3,000,000 in the aggregate). Each unit consists of: (i) one share of its common stock, $0.00001 par value per share; and (ii) one-half of one Series D Stock Purchase Warrant. Each full Series D Warrant entitles the holder to purchase one additional share of our common stock at a price of $0.30 for a period commencing on the date of issuance and terminating on December 31, 2013.

 

Warrants

 

As part of the November 2010 – May 2011 private placement discussed above, BluFlow issued a total of 4,582,500 Series C Common Stock Purchase Warrants. On December 29, 2011, the date of the merger, Ceres Ventures had warrants outstanding to purchase 400,000 shares of common stock at an exercise price of $1.50 per share. The Ceres Ventures’ warrants expire on May 19, 2012.

 

The Company estimated the fair value of the warrants on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

  

		Series C Warrants
Number of warrants issued			4,582,500
Exercise price			$0.16
Black-Scholes option pricing model assumptions:
Risk-free interest rate			0.60%
Expected term (in years)			1.8
Expected volatility (*)			152.86%
Dividend per share			$0
Expiration date			December 31, 2012

 

* As a newly formed entity it is not practicable for it to estimate the expected volatility of its share price. The Company selected two (2) comparable public companies listed on NYSE Amex or NASDAQ Capital Market engaged in similar activities to calculate the expected volatility. The Company calculated the comparable companies’ historical volatility over the expected life and averaged them as its expected volatility.

 

During the three month period ended March 31, 2012, no warrants were granted, exercised or cancelled.