Quarterly report pursuant to sections 13 or 15(d)

9. Stock Options

9. Stock Options
9 Months Ended
Sep. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Options

The Company has adopted the provisions of Topic 718, Compensation, of the Accounting Standards Codification, which requires companies to measure the cost of services received in exchange for equity instruments based on the grant date fair value of those awards and to recognize the compensation expense over the requisite service period during which the awards are expected to vest.


On December 29, 2008, the Company adopted the Pacific Entertainment Corporation 2008 Stock  Option Plan (the “Plan”), which provides for the issuance of qualified and non-qualified stock options to officers, directors, employees and other qualified persons. The Plan is administered by the Board of Directors of the Company or a committee appointed by the Board of Directors. The number of shares of the Company’s common stock initially reserved for issuance under the Plan was 11 million.  On September 2, 2011, the shareholders holding a majority of the Company’s outstanding common stock adopted an amendment to the Company’s 2008 Stock Option Plan to increase the number of shares of common stock issuable under the plan to 50 million.


On January 1, 2012, the Company issued a Stock Option Grant to the Vice President of Sales for the purchase of up to 25,000 shares of common stock, which is fully vested as of March 31, 2012, with a life of five years and an exercise price of $0.50.


On May 2, 2012, pursuant to an employment agreement with the Chief Financial Officer, the Company issued an option to purchase up to 200,000 shares of common stock.  The option fully vests on December 31, 2014, has a five year term and an exercise price of $0.44.


On July 6 2012, the Company issued an option to purchase 100,000 shares of common stock pursuant to a services agreement with a consultant.  The option is fully vested as of July 6, 2012, has a five year term and an exercise price of $0.44.


The Company used the Black-Scholes valuation model to estimate the grant date fair value of the options granted in 2012.  The Company used the following assumptions for the 2012 valuations:


Risk-free interest rate   0.64-0.85%
Expected life in years   5
Dividend yield    0
Expected volatility    59.19-63.64%



The following schedule summarizes the changes in the Company’s stock option plan for the nine months ended September 30, 2012:


                Weighted           Weighted  
    Options Outstanding     Average           Average  
    Number     Exercise     Remaining     Aggregate     Exercise  
    of     Price     Contractual     Intrinsic     Price  
    Shares     per Share     Life     Value     per Share  
Balance at December 31, 2011     14,995,000     $ 0.18-0.55     4.47 years       -     $ 0.43  
Options Granted     325,000     $ 0.44-0.50     4.83 years       -     $ 0.42  
Options Exercised     -       -       -       -       -  
Options Expired     -       -       -       -       -  
Balance at September 30, 2012     15,320,000     $ 0.18-0.55     4.05 years       -     $ 0.44  
Exercisable September 30, 2012     12,420,000     $ 0.18-0.55     2.38 years       -     $ 0.35  


During the nine months ended September 30, 2012 and 2011 the Company recognized $192,049 and $385,137 in Stock Compensation expense, respectively.