Stockholders' Deficiency

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Stockholders' Deficiency

7 - STOCKHOLDERS’ DEFICIENCY

Options

The following table summarizes the activity for all stock options:

	Number of Options			Range of Exercise Price		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Weighted Average Grant Date Fair Value
Outstanding options as of January 1, 2010		42,324,386		$	.0032-$.02131	$	.01681		6.0	$	.00865
Options granted		10,641,246		$	.0032	$	.0032		8.8	$	.01959
Options cancelled		(10,641,246	)	$	.0032	$	.0032		-	$	.00141
Outstanding options as of December 31,  2010		42,324,386		$	.0032-$.02131	$	.01681		7.3	$	.01296
Options granted		-			-		-		-		-
Options cancelled		-			-		-		-		-
Outstanding options as of September 30, 2011		42,324,386		$	.0032-$.02131	$	.01681		6.58	$	.01296

The following table provides information about options under the Plan that are outstanding and exercisable as of September 30, 2011:

	Options Outstanding		Options Exercisable
Exercise Price	As of September 30, 2011	Weighted Average Contractual Life Remaining	As of September 30, 2011
$.0032	10,837,532	7.89 years	10,837,532
$.02131	31,486,854	6.12 years	31,486,854
	42,324,386		42,324,386

Included in the above table are 16,071,090 options to non-employees and 26,253,296 to officers of the Company.

Warrants

The Company has 2,116,934 and 1,291,928 warrants outstanding as of September 30, 2011 and December 31, 2010, respectively. 1,291,928 warrants with an exercise price of $.02131 expire July 2015 and 825,006 have an exercise price of $.25; 225,006 expire May 2013 and 600,000 expire July 2013. The warrants include certain provisions that protect the holders from a decline in the stock price of the Company. As a result of those provisions, the Company recognizes the warrants as liabilities at their fair values on each reporting date.

The Company has recorded a warrant liability of $22,597 as of September 30, 2011 and $14,159 as of December 31, 2010, which is based on the Black-Scholes valuation model to estimate the fair value of the warrants. The significant assumptions considered by the model were the remaining term of the warrants, the per share stock price of $.03 and .02131 at September 30, 2011 and December 31, 2010 respectively, a risk free rate of 3.30% and an expected volatility of 60%.