WARRANTS

9 Months Ended

Sep. 30, 2011

At September 30, 2011, the Company had 1,605,333 Warrants outstanding entitling the holder thereof the right to purchase one share of common stock for each warrant held as follows:

			Exercise
Issuance	Number of		Price Per		Expiration
Date	Warrants		Warrant		Date
1/19/2010		36,000	$	0.75	1/19/15
1/19/2010		56,000	$	0.75	1/19/15
2/1/2010		13,333	$	0.75	2/1/15
2/5/2010		500,000	$	0.35	12/31/15
3/1/2010		1,000,000	$	0.10	10/31/11

Total		1,605,333

During the nine months ended September 30, 2011, on May 20, 2011, the Company modified the above warrant dated February 5, 2010 to reduce the conversion price from $0.40 per share to $0.35 per share on the original warrant total of 1,000,000 shares. The owner of the warrant exercised 500,000 warrants in exchange for 500,000 shares of common stock and paid the Company $175,000. As a result of the modification, the Company determined the difference in the fair value of the warrants using the Black-Scholes Options Pricing Model and recorded $9,800 of stock compensation expense.

During the year ended December 31, 2010, the Company:

·	Issued 2,271,999 warrants to purchase one share of common stock for each warrant issued.
·	Received $50,000 upon the exercise of a warrant and issued 166,666 shares of restricted common stock.

·	Received $50,000 upon the sale of a warrant to an accredited investor.
·	Canceled two warrants totaling 800,000 shares as a result of expiration.

All the warrants issued through December 31, 2010 are classified as equity on our balance sheet as they require physical settlement, contain no performance contingencies, have a fixed exercise price and are exercisable by the holder at any time through the expiration date of the warrant. Each warrants fair value was calculated on the date of grant using the Black-Scholes Option Pricing Model. The fair value of the warrants issued was $320,459 offset by the $50,000 warrant sale resulting in $270,459 of net stock compensation expense.

ITRACKR SYSTEMS INC 10-Q