COMMON STOCK WARRANTS

12 Months Ended

Dec. 31, 2012

8.	COMMON STOCK WARRANTS

In February 2012, investors in the Putable-Callable Debenture Series 2012 and Series C warrants acquired 2,500,000 common stock purchase warrants with a strike price of $.10 in an amount equal to fifty percent (50%) of the then unpaid principal amount of the debenture. The warrants were cancelled in April 2012 when the investors elected to convert the debentures to common stock.

In March 2012, investors in the 2012 Common Stock Private Offering acquired 2,250,000 Series C warrants. The warrants remain outstanding and expire December 31, 2017 and bear a $0.15 strike price.

Investors in the 2011 Convertible Debenture plus Series A Warrants acquired 18,475,927 common stock purchase warrants, in an amount equal to one hundred percent (100%) of the shares of common stock that would be issued upon conversion of the Debentures upon issue. The Warrants remain outstanding and expire on December 31, 2016 and bear strike prices ranging from $0.063 to $0.109.

Investors in the 2011 Convertible Debenture plus Series B Warrants acquired 8,961,614 common stock purchase warrants, in an amount equal to fifty percent (50%) of the shares of common stock that would be issued upon conversion of the Debentures upon issue. The Warrants remain outstanding and expire on December 31, 2016 and bear strike prices of $0.10.

In March 2011, the Company offered its employees a ninety day voluntary salary deferral plan while the Convertible Debenture Series 2011 funding was finalized. As an incentive to participate, each employee received a five year warrant to buy common stock at $.20 equal to the amount of their deferral. A total of 192,645 warrants were issued and remain outstanding. The deferred salaries were repaid in June 2011.

Investors in the Convertible Debentures Series 2010 plus Series B Warrants acquired 1,535,160 common stock purchase warrants, designated by the Company as Class B Warrants, in an amount equal to fifty percent (50%) of the shares of common stock that would be issued upon conversion of the Debentures upon issue. The warrants expire on December 31, 2015 and bear strike prices ranging from $0.26180 to $0.32972. In 2011, eleven of the original fifteen investors elected to convert their investment to the convertible Debenture Series 2011 plus Series A Warrant, and as a result 1,191,569 of these warrants were cancelled and 343,591 remaining outstanding.

The Company engaged a financial advisory firm in 2011 and three of their associates received warrants to purchase an aggregate of 1,050,000 shares of common stock at a strike price of $.115. The warrants remain outstanding and will expire October 31, 2015.

In September 2011, the company placed a $100,000 credit facility with a bank, secured by the personal guarantee on one director. In exchange for the guaranty, the director received a warrant to purchase 1,000,000 shares of common stock at a strike price of $0.10. The warrant remains outstanding and will expire on September 30, 2015.

The following table summarizes information about outstanding warrants at December 31, 2012:

Year Issued	Number Outstanding		Remaining Contractual Life in Years		Number Currently Exercisable		Weighted Average Exercise Price
2009		21,682,372		1.6		21,682,372	$	0.10
2010		10,236,227		2.0		10,236,227	$	0.10
2011		29,680,086		3.8		29,680,086	$	0.10
2012		2,500,000		5.0		2,500,000	$	0.15
Total		64,098,685		3.1		64,098,685	$	0.10