STOCK TRANSACTIONS

3 Months Ended

Mar. 31, 2015

STOCK TRANSACTIONS

STOCK TRANSACTIONS

NOTE 6 - STOCK TRANSACTIONS

Series “C” Preferred Stock

On July 9, 2009, the Company authorized and issued 1,000 shares of Series C Preferred Stock in exchange for $700,000.  The 1,000 shares of Series C Stock are convertible into 67,979,725 common shares.  The par value of the Series C Preferred shares is $1.00.

Common Stock

During 2014 the Company entered into a settlement agreement with a consultant under which 3,750,000 shares of previously issued common stock were surrendered and canceled in consideration for a payment to the consultant in the amount of $50,000.

Warrants

The Company had outstanding stock warrants that were issued in prior years to its officers and Directors for a total of 5,975,000 shares of the Company's common stock.  1,975,000 of these warrants had an exercise price of $.05 and expired on November 11, 2011.  The remaining 4,000,000 warrants had an exercise price of $.03 and expired on July 20, 2014.

During September and October 2007, the Company issued 31,823,529 shares of common stock for cash at $.017 per share, or $541,000 total as part of a Private Placement under Rule 506 of Regulation D. Along with the stock, each investor also received a warrant to purchase 30% of the shares purchased in the Private Placement.  A total of 9,547,055 warrants were issued.  The warrants are ten year warrants and have an exercise price of $.025 per share.

Options

In 2005, the Company authorized the 2005 Equity Plan that made available 10,000,000 shares of common stock for issuance through awards of options, restricted stock, stock bonuses, stock appreciation rights and restricted stock units.  On May 20, 2005, the Company granted non-qualified stock options under the Company’s 2005 Equity Plan for a maximum of 250,000 shares of the Company’s common stock for $0.02 per share. The options expire May 25, 2015, and may be exercised any time after May 25, 2005.

On May 1, 2007, the Company granted 4,000,000 stock options to five employees of the Company under the 2005 Plan.  The options vested over two years.  During 2008, 1,000,000 of these options were cancelled prior to vesting. As of December 31, 2010, these options were fully vested and compensation expense fully recognized.

On April 27, 2007, the Company granted a ten-year non-qualified, non-statutory stock option for 102,400,000 “restricted” shares of the Company’s common stock to Stewart Wallach, as incentive compensation.  The exercise price of the options is $.029 per share, which was the fair market value of the stock on the date of grant.  Twenty percent of the options vested on the date of issuance, and twenty percent per year vested on the anniversary date through April 23, 2011.  On May 23, 2008, 74,666,667 of these options were cancelled.   On July 31, 2009, 5,000,000 of the fully vested options were amended and transferred to James McClinton.  Also on April 23, 2007, the Company granted a ten-year non-qualified, non-statutory stock option for 28,100,000 “restricted” shares of the Company’s common stock to James McClinton as incentive compensation.  The exercise price of the options is $.029 per share, which was the fair market value of the stock on the date of grant.  Twenty percent of the options vested on the date of issuance, and twenty percent per year vested on the anniversary date through April 23, 2011.  On May 1, 2008, 850,000 of these options were cancelled.

On October 22, 2007, the Company granted 700,000 stock options to a business associate of the Company.  The options vested over two years.

On January 10, 2008, the Company granted 1,000,000 stock options to an advisor of the Company. The options vested over one year.

On February 5, 2008, the Company granted 3,650,000 stock options to four directors and one employee of the Company.  The options vested over two years.

On May 1, 2008, the Company granted 850,000 stock options to an employee of the Company.  The options vested over two years.

On June 8, 2009, the Company granted 4,500,000 stock options to four Directors of the Company.  The options vested over one year.

On April 23, 2010, the Company granted 4,500,000 stock options to four Directors of the Company and 300,000 stock options to the Company Secretary.  The options vested over one year.

On July 1, 2011, the Company granted 4,500,000 stock options to four Directors of the Company and 150,000 stock options to the Company Secretary.  The options vested over one year.

On August 6, 2012, the Company granted 4,500,000 stock options to four Directors of the Company and 150,000 stock options to the Company Secretary.  The options vested over one year.  The Company Secretary has subsequently left the Company and the 150,000 granted options have been canceled.

On January 1, 2014, the Company granted 3,000,000 stock options to two directors of the Company and 150,000 stock options to the Company Secretary.  The options vested on August 5, 2014.

On January 2, 2015, the Company granted 3,000,000 stock options to two directors of the Company and 150,000 stock options to the Company Secretary.  The options will vest on August 5, 2015.

The Binomial Lattice (Suboptimal) option pricing model was used to calculate the fair value of the options granted.  The following assumptions were used in the fair value calculations:

Risk free rate – .65 – 3.0%

Expected term – 5 to 10 years

Expected volatility of stock – 500%

Expected dividend yield – 0%

Suboptimal Exercise Behavior Multiple – 2.0

Number of Steps – 150

For the period ended March, 31 2015, the Company recognized compensation expense of $29,433 related to these stock options. A further compensation expense of $43,017 will be recognized for these options in 2015.

Options (continued)

The following table sets forth the Company’s stock options outstanding as of March 31, 2015 and December 31, 2014 and activity for the years then ended:

			Weighted
		Weighted	Average
		Average	Remaining	Aggregate
		Exercise	Contractual	Intrinsic
	Shares	Price	Term (Years)	Value
Outstanding, December 31, 2013	74,383,333	$    0.029	3.28	$          -
Granted	3,150,000	0.029	-	-
Exercised	-	-	-	-
Outstanding, December 31 , 2014	77,533,333	$    0.029	2.36	$           -
Granted	3,150,000	0.029	-	-
Exercised	-	-	-	-
Forfeited/expired	-	-	-	-
Outstanding, March 31, 2015	80,683,333	$    0.029	2.31	$          -
Vested/exercisable at  December, 31, 2014	77,533,333	$    0.029	2.36	$          -
Vested/exercisable at March 31, 2015	77,533,333	$    0.029	2.31	$          -

The following table summarizes the information with respect to options granted, outstanding and exercisable under the 2005 plan:

Exercise Price	Options Outstanding	Remaining Contractual Life in Years	Average Exercise Price	Number of Options Currently Exercisable
$.020	250,000	.17	$.020	250,000
$.029	54,983,333	2.08	$.029	54,983,333
$.029	2,500,000	3.08	$.029	2,500,000
$.029	700,000	4.08	$.029	700,000
$.029	1,000,000	2.58	$.029	1,000,000
$.029	150,000	2.83	$.029	150,000
$.029	850,000	4.17	$.029	850,000
$.029	4,500,000	.08	$.029	4,500,000
$.029	300,000	5.08	$.029	300,000
$.029	4,500,000	1.25	$.029	4,500,000
$.029	150,000	6.25	$.029	150,000
$.029	4,500,000	2.33	$.029	4,500,000
$.029	3,000,000	3.75	$.029	3,000,000
$.029	150,000	8.75	$.029	150,000
$.029	3,000,000	4.75	$.029	3,000,000
$.029	150,000	9.75	$.029	150,000