Stock Compensation

9 Months Ended

Sep. 30, 2013

Notes

Stock Compensation

STOCK COMPENSATION

The Company’s 2004 Stock Plan (the “ 2004 Plan”), which is shareholder approved, permits the grant of share options and shares to its employees for up to 1,500,000 shares of Common Stock as stock compensation. All stock options under the 2004 Stock Plan are granted at the fair market value of the Common Stock at the grant date. Employee stock options vest ratably over a three-year period and generally expire 5 years from the grant date.

The Company’s 2009 Incentive Stock Plan, (the “2009 Plan”), which is Board of Director approved, permits the grant of share options and shares to directors, executives and selected employees and consultants for up to 25,000,000 shares of Common Stock as stock compensation.

Accounting for Employee Awards:

The Company adheres to the provisions of Share Based Compensation as defined in the FASB codification, topic ASC 718. The codification focuses primarily on accounting for transactions in which an entity obtains employee services through share-based payment transactions. This guidance requires an entity to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The cost is recognized over the period during which an employee is required to provide services in exchange for the award.

As a result of the adoption of the provision of Share Based Compensation, the Company's results for the nine months ended September 30, 2013 and 2012 include share-based compensation expense for employees and board of directors totaled approximately $120,000 and $120,000, respectively, which have been included in the general and administrative expenses line item in the accompanying consolidated statement of operations. No income tax benefit has been recognized in the income statement for share-based compensation arrangements as the Company has provided a 100% valuation allowance on its’ net deferred tax asset. Stock option compensation expense is the estimated fair value of options granted amortized on a straight-line basis over the requisite service period for the entire portion of the award. The Company has not adjusted the expense by estimated forfeitures, as required for employee options, since the forfeiture rate based upon historical data was determined to be immaterial.

Accounting for Non-employee Awards:

The Company records its stock-based compensation expense in accordance with ASC 718-10, formerly SFAS 123R, “Share Based Payment” to its non-employee consultants for stock granted.

Stock compensation expense related to non-employee options was $0 for the nine months ended September 30, 2013 and 2012, respectively.  These amounts are included in the Consolidated Statements of Operations within the general and administrative expenses line item.

There were no options granted to non-employees during the nine months ended September 30, 2013.

9

The following table represents our stock options granted, exercised, and forfeited during the nine months ended September 30, 2013.

				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Number			Price		Contractual		Intrinsic
Stock Options	of Shares			per Share		Term		Value
Outstanding at December 31, 2011		31,504,900		$	0.09		2.7715	$	0
Granted		-			-		-		-
Exercised		-			-		-		-
Forfeited/expired		(11,237,805	)		0.11
Outstanding at December 31, 2012		20,267,815		$	0.08		2.3099	$	0
Exercised		-			-		-		-
Forfeited/expired		(1,250,000)			0.15		-		-
Outstanding at September 30, 2013		19,017,815		$	0.07		1.6938	$	0

As of September 30, 2013 and 2012, $0 of compensation cost related to non-vested stock options was recognized