Summarizes outstanding warrants and their respective exercise prices

The following summarizes outstanding warrants and their respective exercise prices at December 31, 2012:

	Shares						Remaining
	Underlying		Exercise		Dates of		Contractual
Description	Warrants		Price		Expiration		Term (in years)

Series B Warrants		100,000	$	3.00		Dec 2013		1
Series C Warrants		100,000	$	5.00		Dec 2013		1
Series D Warrants		200,000	$	1.00		Dec 2014		2
Series D Warrants Series C warrants		200,000	$	1.00		Mar 2015		2.3
Convertible Note Warrants		69,445	$	1.80		Sep 2014		1.5
Secured Note Warrants		333,333	$	1.60		Aug 2015		2.7

		1,002,778

Summarizes outstanding stock options and their respective exercise prices

The following summarizes outstanding stock options and their respective exercise prices at December 31, 2012:

	Shares						Remaining
	Underlying		Exercise		Dates of		Contractual
Description	Options		Price		Expiration		Term (in years)

Directors Options		50,000	$	0.77		Jun 2014		1.4
Officers Options		600,000	$	0.77		Jun 2016		3.4
Directors Options		150,000	$	1.15		Jun 2015		2.5
Officers Options		600,000	$	0.54		Dec 2017		4.9

		1,400,000

Stock Options Black Scholes model

On June 6, 2011, we issued 975,000 stock options to directors and officers as follows:

·

Options to purchase up to a total of 75,000 shares of common stock were granted to our three independent members of the Board of Directors. These options vested and became exercisable immediately. The weighted-average estimated fair value of the stock options granted was $0.65 per share using the Black-Scholes model with the following assumptions:

Expected volatility	164.6
Risk-free interest rate	0.74%
Expected life	3 years
Dividend yield	0%

On June 28, 2012, we issued 150,000 stock options to directors and officers as follows:

·

Options to purchase up to a total of 150,000 shares of common stock were granted to the certain members of the Board of Directors. These options vested and became exercisable immediately. The weighted-average estimated fair value of the stock options granted was $1.15 per share using the Black-Scholes model with the following assumptions:

Expected volatility	136.0
Risk-free interest rate	0.40%
Expected life	3 years
Dividend yield	0%

Stock Options Black Scholes model

Options to purchase up to a total of 900,000 shares of common stock were granted to our two executive officers. These options vest and become exercisable in twelve quarterly periods for the first three years of the five-year life of the options. The weighted-average estimated fair value of the stock options granted was $0.72 per share using the Black-Scholes model with the following assumptions:

Expected volatility	164.6
Risk-free interest rate	1.60%
Expected life	5 years
Dividend yield	0%

Options to purchase up to a total of 600,000 shares of common stock were granted to three officers as they each were given employment agreements which included the right to purchase 200,000 shares of common stock at the price of $.54 per share for the next two years. These options vest evenly every six months over the first two years of the five-year life of the options. The weighted-average estimated fair value of the stock options granted was $0.46 per share using the Black-Scholes model with the following assumptions:

Expected volatility	130.21
Risk-free interest rate	0.61%
Expected life	5 years
Dividend yield	0%

Summary of Warrant Activity

A summary of the warrant activity for the years ended December 31, 2012 and 2011 follows:

						Weighted-
				Weighted-		Average		Aggregate
	Shares			Average		Remaining		Intrinsic
	Underlying			Exercise		Contractual		Value
Description	Warrants			Price		Term (in years)		(In-the-Money)

Outstanding and exercisable at December 31, 2010		200,000		$	2.75		2.5	$	-

Warrants issued with long-term debentures		200,000		$	2.75		1.5	$	-

Warrants issued as consultant compensation		400,000		$	1.00		3.1	$	400,000

Outstanding and exercisable at December 31, 2011		800,000		$	1.88		2.3	$	400,000

Warrants issued with long-term notes payable		402,778		$	1.63		2.5	$	-

Warrants expired (Series A)		(200,000	)	$	-		-	$	-

Outstanding and exercisable at December 31, 2012		1,002,778		$	1.85		2.0	$	-