Note 9 – Stock Options and Warrants

Stock Options and Compensation-Based Warrants

The Company has three incentive stock option plans wherein 44,000,000 shares of the Company’s common stock are reserved for issuance there under.

No income tax benefit has been recognized for share-based compensation arrangements.  Otherwise, no share-based compensation cost has been capitalized in theconsolidated balance sheet.

A summary of the status of options and compensation-based warrants at March 31, 2013, and changes during the three months then ended is presented in the following table:

At March 31, 2013, options to acquire 80,000 shares of common stock have no stated contractual life. The fair value of other stock option grants and compensation-based warrants is estimated on the date of grant or issuance using the Black-Scholes option pricing model.   3,450,000 options were issued in the three-month period ended March 31, 2013 and none in the three-month period ended 2012. The weighted average fair value of stock options issued during the three months ended March 31, 2013 as $0.15.  The weighted-average assumptions used for the stock options granted and compensation-based warrants issued during the three months ended March 31, 2013 were risk-free interest rate of 0.77%, volatility of 181%, expected life of 5.0 years, and dividend yield of zero. The expected life of stock options represents the period of time that the stock options granted are expected to be outstanding prior to exercise. The expected volatility is based on the historical price volatility of the Company’s common stock. The risk-free interest rate represents the U.S. Treasury constant maturities rate for the expected life of the related stock options. The dividend yield represents anticipated cash dividends to be paid over the expected life of the stock options. The intrinsic values are based on a March 31, 2013 closing price of $0.016 per share.

Share-based compensation from all sources recorded during the three months ended March 31, 2013 and 2012 was $107,115 and $17,004, respectively, and is reported as general and administrative expense in the accompanying condensed consolidated statements of operations.  As of March 31, 2013, there is approximately $113,069 of unrecognized compensation cost related to stock-based payments that will be recognized over a weighted average period of approximately .12 years.

Stock Warrants

A summary of the status of the warrants outstanding at March 31, 2013, and changes during the three months then ended is presented in the following table: