Options and warrants

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

8. Options and warrants

The Company's 2008 Incentive Compensation Plan (the 2008 Plan) authorizes up to 5,000,000 (not affected for the reverse stock split) shares of common stock to employees or consultants, unless contained in the written award approved by the Board of Directors.

During the year ended December 31, 2011, the Company adopted the 2011 Incentive Compensation Plan (the 2011 Plan) which superseded the 2008 Plan.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 (not affected for the reverse stock split) 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 2015 and 2014, the Company did not grant any common stock warrants to consultants, directors and employees, respectively, related to the Plan. As of June 30, 2015, 2,921,554 (not affected for the reverse stock split) shares are available under the Plan for future grants, awards, options or share issuance.

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 June 30, 2015, based on the Company's closing stock price of $0.07 was $0. The aggregate intrinsic value of options outstanding and exercisable at December 31, 2014, based on the Company's closing stock price of $0.388 was $0. Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of the options.

There were 4,500,000 options issued to directors for past services during the six months ended June 30, 2015, which were outside of the 2011 Incentive Compensation Plan. The Company recognized approximately $313,000 of stock based compensation for the six months ended June 30, 2015. The grant date fair value of these options was $0.07 per share. The options vest immediately and expire 5 years from date of grant.

The assumptions made in calculating the fair value of options granted during the six months ended June 30, 2015 are as follows:

Expected volatility	264.8	%
Expected dividend yield	-
Risk-free interest rate	1.62	%
Expected term (in years)	5.0

The following table represents our stock option and warrant activity for the six months ended June 30, 2015:

	Shares		Weighted Average Exercise Prices		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding and Exercisable
Outstanding at December 31, 2014		120,400	$	7.00		2.27		-
Options and warrants granted		4,500,000	$	0.16		5.00		-
Options and warrants cancelled or expired		6,650	$	8.23		-		-
Outstanding at June 30, 2015		4,613,750	$	0.33		4.90		-
Exercisable at June 30, 2015		4,613,750	$	0.33		4.90		-

Net cash proceeds from the exercise of options and warrants were $0 for each of the six months ended June 30, 2015 and 2014.