Equity Options and Warrants (Tables)

12 Months Ended

Dec. 31, 2012

Stock Option Estimation under Black-Sholes Model

The dividend yield was zero since the Company will not be paying dividends for the foreseeable future. For stock option grants in 2012, the following assumptions were used:

Range of risk-free interest rates	0.669% – 2.812%
Expected term of options in years	5.003 – 6.256
Range of expected volatility	34.70% – 38.42%

Summary of Option Activity

A summary of option activity for the years ended December 31, 2012 and December 31, 2011, follows:

	For the year ended December 31,
	2012				2011
	Shares		Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at the beginning of the year		2,363,104	$	0.188		2,803,104		$	0.209
Granted		1,166,667	$	0.452		—		$	—
Exercised		—	$	—		—		$	—
Forfeited and expired		—	$	—		(440,000	)	$	0.324
Outstanding at the end of the year		3,529,771	$	0.275		2,363,104		$	0.188
Exercisable at the end of the year		2,879,711	$	0.255		1,153,104		$	0.225

Common Stock Options Outstanding and Exercisable

Common stock options outstanding and exercisable at December 31, 2012 were as follows:

As of December 31, 2012
	Options Outstanding				Options Exercisable
Exercise Prices	Number Outstanding		Weighted Average Years of Remaining Contractual Life		Number Outstanding
$0.125		2,023,104		7.82		1,623,104
$0.250		240,000		6.01		240,000
$0.325		340,000		1.32		340,000
$0.375		120,000		7.61		120,000
$0.395		266,667		9.85		266,667
$0.625		40,000		2.42		40,000
$0.745		500,000		9.68		250,000
Total		3,529,771		7.42		2,879,771

Shares Issuable upon Exercise of Warrants

Therefore, shares that may potentially be issued upon the exercise of warrants as a result of subscriptions received by the Company and issued to consultants through December 31, 2012 are as follows:

	Number of shares potentially issuable		Weighted average exercise price
Balance, December 31, 2011		—	$	—
Issued in fulfillment of subscriptions		4,000,000		0.50
Issued to consultant		133,335		0.50
Exercised		—		—
Balance, December 31, 2012		4,133,335		0.50

Remaining Number of Years and Weighted Average Term to Expiration of Outstanding Warrants

At December 31, 2012, the remaining number of years to expiration and the weighted average term to expiration for the 4,133,335 outstanding warrants related to subscriptions that had been fulfilled through that date were as follows:

Expiration Date	Number of shares potentially issuable		Remaining years to expiration and weighted average		Fair Value of Warrants (at $0.50 exercise price)
October 26, 2016		200,000		3.82	$	107,446
November 1, 2016		50,000		3.84		26,862
December 4, 2016		200,000		3.93		107,446
December 27, 2016		200,000		3.99		107,446
February 13, 2017		50,000		4.12		26,862
February 27, 2017		100,000		4.16		53,723
March 12, 2017		250,000		4.20		134,308
April 4, 2017		150,000		4.26		80,585
April 22, 2017		250,000		4.31		134,308
May 9, 2017		500,000		4.36		268,616
May 14, 2017		1,050,000		4.37		564,094
July 22, 2017		500,000		4.56		268,616
August 30, 2017		500,000		4.67		268,616
August 30, 2017		133,335		4.67		71,632
		4,133,335		4.34	$	2,220,560

Black-Scholes Valuation Assumption of Warrants Issued

The following assumptions were used for the Black-Scholes valuation of the warrants issued:

	Assumption
Dividend rate		0	%
Annualized volatility		39.00	%
Risk free interest rate		0.59%-1.20	%
Expected life of warrants (years)		5.00