9. STOCK OPTIONS AND WARRANTS

12 Months Ended

Dec. 31, 2012

Stock Options And Warrants

NOTE 9 - STOCK OPTIONS AND WARRANTS

NOTE 9 - STOCK OPTIONS AND WARRANTS

The shareholders adopted the 1998 Stock Incentive Plan (the “Plan”).  As amended on August 11, 2003, the Plan reserves 20,000,000 shares of common stock for issuance upon the exercise of options which may be granted from time-to-time to officers, directors and certain employees and consultants of the Company or its subsidiaries.  The Plan permits the award of both qualified and non-qualified incentive stock options.   During the year ended December 31, 2012, the Company granted certain stock options to third party consultants.  The Company did not grant any stock options during the year ended December 31, 2011. The Company also issued stock options to a third party investor in connection with the Company selling common stock for cash as more fully described in Note 7 to the financial statements. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the weighted average assumptions noted below:

	December 31
Assumption	2012		2011
Dividend yield		–		–
Weighted average volatility		476.77%		–
Risk-free interest rate		0.18%		–
Expected life (years)		0.62		–

The summary of option activity for the years ended December 31, 2012 and 2011 is presented below:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (years)
Balance as of December 31, 2010	–			–		–
Granted	–			–		–
Exercised	–			–		–
Canceled	–			–		–
Expired	–			–		–
Balance as of December 31, 2011		–			–		–
Granted		285,000			0.08		0.25
Exercised		–			–		–
Canceled		–			–		–
Expired		(160,000	)		0.10		–
Balance as of December 31, 2012		125,000			0.06		0.25

The weighted average grant-date fair value of options granted during the year ended December 31, 2012 was $0.09. The Company did not issue any stock options during the year ended December 31, 2011.

Outstanding and exercisable options presented by price range as of December 31, 2012 are as follows:

		Options Outstanding						Options Exerciseable
				Weighted
				Average		Weighted				Weighted
		Number of		Remaining		Average		Number of		Average
Exercise		Options		Life		Exercise		Options		Exercise
Price		Outstanding		(Years)		Price		Exercisable		Price
$	0.06		125,000		0.25	$	0.06		125,000	$	0.06

The estimated fair value of the Company’s stock options is amortized over the options’ vesting period on the straight-line basis. The Company recognized the following the equity-based compensation expense and benefits during the year ended December 31, 2012 and 2011:

	December 31
	2012		2011
Stock-based compensation expense	$	14,420	$	–

As of December 31, 2012, there was no unrecognized compensation cost associate with stock options issued by the Company and there was no intrinsic value associated with the Company’s stock options as the fair value of the Company’s stock was lower than the option price.