Options and warrants

12 Months Ended

Dec. 31, 2012

6.	Options and warrants

The Company’s 2008 Incentive Compensation Plan (the 2008 Plan) authorizes up to 5,000,000 shares of common stock to employees or consultants, unless contained in the written award approved by the Board of Directors. The Company granted 1,600,000 options to consultants under this plan during the year ended December 31, 2011. During the year ended December 31, 2011, the Company adopted the 2011 Incentive Compensation Plan (the 2011 Plan) which superseded the 2008 Plan. As a result, there are no future options are to be issued from the Company’s 2008 Plan.

The Company’s 2011 Plan authorizes up to 5,000,000 shares of common stock to persons employed by the Company either as an employee, officer, director or independent consultant or other person employed by the Company, provided that no person can be granted shares under the 2011 Plan for services related to raising capital or promotional activities. There are no restrictions on resale upon the purchases of the stock from the employees or the consultants, unless contained in the written award approved by the Board of Directors. During 2012 and 2011, the Company granted 0 and 850,000 common stock warrants to consultants, directors and employees, respectively, related to the Plan. As of December 31, 2012, 4,150,000 shares are available under the Plan for future grants.

The fair value of each option under the 2008 and 2011 Incentive Compensation Plans were estimated on the date of grant using the Black Scholes model that uses assumptions noted in the following table. Expected volatility is based on the Company’s historical market price at consistent points in periods equal to the expected life of the options. The expected term of options granted is based on the Company’s historical experience. The risk-free interest rate for the periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company estimates forfeitures; both at the date of grant as well as throughout the requisite service period, based on the Company’s historical experience and future expectations.

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2012, based on the Company’s closing stock price of $0.012 was $0. The aggregate intrinsic value of options outstanding and exercisable at December 31, 2011, based on the Company’s closing stock price of $0.04 was $0. Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of the options.

During the year ended December 31, 2011, the Company issued 800,000 warrants in conjunction with the issuance of common stock. The warrants entitle the holder to purchase 800,000 shares of the Company’s common stock at any time, at an exercise price of $0.30 per share. There were no warrants issued during the year ended December 31, 2012.

The following table represents our stock option and warrant activity for the years ended December 31, 2012:


	Shares			Range of Exercise Prices		Weighted Average Grant Date Fair Value
Outstanding and Exercisable
Outstanding at December 31, 2010		3,215,413		$	0.10 – 2.00
Options and warrants granted		2,450,000		$	0.15 – 0.30	$	0.17
Options and warrants cancelled or expired		(260,000	)	$	2.00
Outstanding at December 31, 2011		5,405,413		$	0.10 – 2.00
Options and warrants granted		0
Options and warrants cancelled or expired		0

Outstanding at December 31, 2012		5,405,413		$	0.10 – 2.00
Exercisable at December 31, 2012		5,405,413		$	0.10 – 2.00
Exercisable at December 31, 2011		5,405,413		$	0.10 – 2.00

The following table summarizes information about options and warrants outstanding and exercisable as of December 31, 2012:

Outstanding Options and Warrants

Exercisable Options and Warrants

Range of Exercise Price

Number

Outstanding

Weighted

Average

Remaining

Life

Weighted

Average

Price

Weighted

Average

Remaining

Life

Number

Exercisable

Weighted

Average

Price

$ 0.10 – $2.00

5,405,413

2.87 Years

0.29

2.87 Years

5,405,413

0.29

Net cash proceeds from the exercise of options and warrants were $0 for each of the years ended December 31, 2012 and 2011, respectively. During 2012 and 2011, the Company recognized approximately $0 and $200,000 in compensation expense related to stock option grants. As of December 31, 2012 unrecognized compensation expense related to common stock options was approximately $57,000, which is expected to be recognized over a weighted average period of 3 years.

During the year ended December 31, 2012, the Company’s Board of Directors approved an increase of common stock authorized to be issued to 299,000,000 shares.