Quarterly report pursuant to sections 13 or 15(d)

Note 8: Stock Options

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Note 8: Stock Options
 6 Months Ended
Jun. 30, 2011
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]
Note 8: 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 April 4, 2011, pursuant to an Action by Majority of Stockholders, the number of shares reserved under the plan was increased to 16 million.

On January 1, 2011, the Company issued a Stock Option Grant to Anthony Dates for the purchase of up to 25,000 shares of common stock, fully vesting as of March 31, 2011.

On April 1, 2011, pursuant to employment agreements between the Company and Messrs. Moeller, Meader, Larry Balaban and Howard Balaban each executive has been granted a non-qualified stock option to purchase up to 1,000,000 shares of the Company’s common stock, vesting as to 250,000 shares on April 1, 2011 and 250,000 shares per year on the anniversary date of the agreements.

On April 1, 2011, the Company issued a stock option grant to Anthony Dates for the purchase of up to 25,000 shares of common stock, fully vesting as of June 30, 2011.

On June 1, 2011, as a result of a consulting agreement with Al Kahn to provide certain management and advisory services, the Company issued a stock option grant notice to purchase up to 1,000,000 shares of the Company’s common stock, vesting as to 500,000 shares each on May 31, 2012 and 2013.

On June 30, 2011, options to purchase up to 20,000 shares of the Company’s common stock previously issued in 2009 expired due to the termination of an employee.

The Company used the Black-Scholes valuation model to estimate the grant date fair value of the options granted in 2010 and 2011.  The Company used the following assumptions for the 2010 and 2011 valuations:

Risk-free interest rate
1.21% – 2.01%
Expected life in years
3-10
Dividend yield
0
Expected volatility
68.54% - 106.31%

The following schedule summarizes the changes in the Company’s stock option plan for the six months ended June 30, 2011:

               
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, 2010
    8,970,000     $ 0.34-0.55    
3.25 years
      -     $ 0.44  
                                       
Options Granted
    5,050,000     $ 0.34-0.50    
8.75 years
      -     $ 0.44  
Options Exercised
    -       -       -       -       -  
Options Expired
    20,000     $ 0.50       -       -       -  
Balance at June 30, 2011
    14,000,000     $ 0.34-0.55    
4.92 years
      -     $ 0.44  
                                         
Exercisable June 30, 2011
    9,700,000     $ 0.34-0.55    
3.37 years
      -     $ 0.44  

During the six months ended June 30, 2011 and 2010 the Company recognized $306,367 and $63,894 in Stock Compensation expense, respectively.