4. STOCK OPTIONS AND WARRANTS

6 Months Ended

Mar. 31, 2013

Other Liabilities Disclosure [Abstract]

STOCK OPTIONS AND WARRANTS

4. STOCK OPTIONS AND WARRANTS

The Company adopted a Stock Option Plan for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of Options for Twenty Million (20,000,000) shares of Common Stock. Options granted under the Plan may be either Incentive Options or Nonqualified Options and shall be administered by the Company's Board of Directors ("Board"). Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective Option agreements may provide. On March 21, 2013, the Company granted 1,000,000 stock options to each of the four non-affiliated members of its Board of Directors for a total of 4,000,000 options for continued services and performance to the Company. Each option vested upon issuance and provides for an exercise price of $0.014 per share (104% of the market price on the date of grant) and can be exercised at any time over a three-year period.

	For the period ended
	3/31/2013
Risk free interest rate		0.38	%
Stock volatility factor		138.33	%
Weighted average expected option life		3 years
Expected dividend yield		None

A summary of the Company’s stock option activity and related information follows:

	For the period ended
	3/31/2012
			Weighted
	Number		average
	of		exercise
	Options		price
Outstanding, beginning of the period		5,000,000	$	0.110
Granted		4,000,000		0.014
Exercised		—		—
Expired		—		—
Outstanding, end of the period		9,000,000	$	0.070
Exercisable at the end of the period		8,000,000	$	0.050
Weighted average fair value of
options granted during the period			$	0.014

The weighted average remaining contractual life of options outstanding issued under the plan as of March 31, 2013 was as follows:

						Weighted
						Average
		Stock		Stock		Remaining
Exercisable		Options		Options		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	0.160		2,500,000		2,500,000	1.00 years
$	0.100		1,000,000		—	2.55 years
$	0.014		4,000,000		4,000,000	2.98 years
$	0.045		1,500,000		1,500,000	3.79 years
			9,000,000		8,000,000

Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. Stock-based compensation expense recognized in the financial statements of operations during the three-months ended March 31, 2013, included compensation expense for the stock-based payment awards granted prior to, but not yet vested, as of March 31, 2013 based on the grant date fair value estimated, and compensation expense for the stock-based payment awards granted subsequent to March 31, 2013, based on the grant date fair value estimated. We account for forfeitures as they occur. The stock-based compensation expense recognized in the statement of operations during the three months ended March 31, 2013 and 2012 was $43,140 and $45,000, respectively.

Warrants

The Company had no warrants outstanding as of March 31, 2013.