11. Stock Options

From 2005 through 2008, the Company had reserved 85,260,000 shares of Common Stock for issuance under its 2005 and 2008 stock option plan. Of this amount 83,410,000 options were granted and 100,000 were exercised. As of December 31, 2011 all of the options that were granted under the 2005 and 2008 plans were forfeited and the Company discontinued both plans as of that date.

Stock Options Awarded Under the 2012 Plan

On August 28, 2012, the stockholders of the Company approved the creation of the 2012 Employee, Director and Consultant Equity Incentive Plan (the “2012 Plan”), pursuant to which 1,617,820 shares of Common Stock were reserved for future issuance upon the exercise of options granted under the 2012 Plan.

On December 17, 2012, the Company granted 1,400,000 options under the 2012 Plan at a strike price of $0.60. The options were granted to employees and a director, have a 10 year life and vest as to each grantee annually over a 3 year period, beginning in December 2013. The Company recorded $2,944 of compensation expense in 2012 as a result of these option grants. There are 217,820 options available for grant under the 2012 Plan at December 31, 2012.

Additional information about the Company’s stock option plans is summarized below:

	December 31, 2012					December 31, 2011*					June 30, 2011*
		Weighted Average					Weighted Average					Weighted Average
		Exercise		Grant Date			Exercise		Grant Date			Exercise		Grant Date
	Options	Price		Fair Value		Options	Price		Fair Value		Options	Price		Fair Value
Outstanding at beginning of period	—	$	—	$	—	23,380	$	29.00	$	25.50	166,620	$	28.00	$	22.00
Granted	1,400,000	0.60		0.151		—	—		—		—	—		—
Rescinded (Exercised)	—	—		—		—	—		—		—	—		—
Forfeited	—	$	—	$	—	23,380	29.00		25.50		143,240	28.00		21.50
Outstanding at end of period	1,400,000	$	0.60	$	0.151	—	$	—	$	—	23,380	$	29.00	$	25.50
Options exercisable at end of period	—	$	—	$	—	—	$	—	$	—	23,380	$	29.00	$	25.50

* Reflects a 1 for 500 reverse split

The fair value of each option grant was estimated on December 17, 2012 (for the options granted under the 2012 Plan) using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate of 0.40%, volatility of 36.46% and expected lives of three years. All options granted have a maximum three year service period.

The Company intends to withhold sufficient unissued shares of common stock to issue upon exercise of any options by the grantees.