8. SHAREHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2012

Shares Issued Upon Exercise of Warrants

On March 31, 2012, the Company issued 1,250,000 shares of its common stock to SOL, an affiliate of the Company’s Chairman, in consideration of the exercise of warrants at an exercise price of $0.40 upon the conversion of $500,000 of an unsecured loan made by the Chairman to the Company during October 2011.

Stock Options

At June 30, 2012, options shares outstanding were as follows:	Shares			Weighted Average Exercise Price
Balance at January 1, 2012		1,416,695		$	2.50
Granted		—			—
Exercised		—			—
Expired		(1,416,695	)	$	2.50
Balance at June 30, 2012		—			—

Warrants

At June 30, 2012, warrants shares outstanding were as follows:	Shares			Weighted Average Exercise Price
Balance at January 1, 2012		13,256,220		$	0.82
Granted and Exchanged		9,127,500		$	0.40
Exercised		(1,250,000	)	$	0.40
Exchanged		(7,812,500	)	$	1.50
Expired		(1,243,060	)	$	0.74
Balance at June 30, 2012		12,078,160		$	0.54

During the three months ended March 31, 2012, the Company negotiated Amendment and Exchange Agreements with holders of $891,500 of the Company’s 10% Unsecured Convertible Notes that matured on March 31, 2012. In connection with these Amendment and Exchange Agreements, the Company is issuing new warrants that will enable the warrant holders to purchase up to 975,000 shares of the Company’s common stock at an exercise price per share of $0.40. These warrants will have a contractual life of three years and expire on March 31, 2015.

Effective March 31, 2012, the Company’s Chairman exercised 1,250,000 underlying a warrant to purchase 7,812,500 shares held by Seven One Limited (“SOL”), a company related to the Chairman by common ownership. These warrants were previously exercisable at $0.64 per share, however, in consideration of the Chairman converting $500,000 of an outstanding unsecured loan into common stock, the Company agreed to re-price these warrants at an exercise price of $0.40. The warrant representing the remaining shares will expire on the original expiration date of December 14, 2015. The total value of the adjustment of the exercise price of these warrants was $446,809 and was reflected as a cost to induce conversion during the six month period ended June 30, 2012.

On May 18, 2012, the Company entered into agreements with 3 accredited investors for a sale by the Company of an aggregate of $340,000 of the May 2012 Notes. In connection with these Notes, the Company is issuing new warrants that will enable the warrant holders to purchase up to 340,000 shares of the Company’s common stock at an exercise price per share of $0.40. These warrants will have a contractual life of three years and expire on March 31, 2015.

The following table summarizes information about stock warrants outstanding and exercisable as of June 30, 2012:

		Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices		Number of Shares Underlying Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Number of Shares		Weighted Average Exercise Price
$	0.40		7,877,500	$	0.40		2.8		7,877,500	$	0.40
$	0.50		1,782,660	$	0.50		0.2		1,782,660	$	0.50
$	0.40		868,000	$	0.40		3.2		868,000	$	0.40
$	0.64		1,500,000	$	0.64		3.5		1,500,000	$	0.64
$	1.00		50,000	$	1.00		1.3		50,000	$	1.00
			12,078,160						12,078,160

As of June 30, 2012, the aggregate intrinsic value of the warrants outstanding and exercisable was $262,365.

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

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+ Details

BALQON CORP. 10-Q/A