Note 3. Common Stock

Share-based Incentive Plans

During the period ended June 30, 2013, the Company had four stock option plans that include both incentive and non-qualified options to be granted to certain eligible employees, non-employee directors, or consultants of the Company.

Share-based Incentive Plans

Active Plans:

2012 Plan

On October 15, 2012, the Company adopted the 2012 Non-Qualified Stock Option Plan (the "2012 Plan"). The purpose of the 2012 Plan is to provide long-term incentives and rewards to those employees of the Company, and any other individuals, whether directors, consultants or advisors who are in a position to contribute to the long-term success and growth of the Company. The options granted have a 10 year contractual term and vest one hundred percent on the date of grant. There are 1,000,000 shares reserved for future issuance under this plan. Information with respect to stock options granted under this plan during the period ended June 30, 2013 is as follows:

	Number of shares	Weighted average exercise price per share
Options outstanding at December 31, 2012	7,000,000	$	0.043
Granted	2,000,000		0.092
Exercised	—		—
Options outstanding at June 30, 2013	9,000,000	$	0.054

2011 Plan

On February 1, 2011, the Company adopted the 2011 Non-Qualified Stock Option Plan (the "2011 Plan"), to replace the 2001 Plan discussed below, and has filed Registration Statements on Form S-8 to register 30,000,000 shares of its common stock. Under the 2011 Plan, employees and consultants may elect to receive their gross compensation in the form of options, exercisable at $.001 per share, to acquire the number of shares of the Company's common stock equal to their gross compensation divided by the fair value of the stock on the date of grant. The options granted have a 10 year contractual term and vest one hundred percent on the date of grant. Information with respect to stock options granted under this plan during the period ended June 30, 2013 is as follows:

	Number of shares		Weighted average exercise price per share
Options outstanding at December 31, 2012		3,000,000		0.145
Granted		1,500,000		0.092
Cancelled or Expired		(1,500,000)		0.145
Exercised		-		-
Options outstanding at June 30, 2013		3,000,000		0.118

2002 Plan

The 2002 Stock Option Plan (“2002 Plan”) provides for the award of qualified and non-qualified options for up to 30,000,000 shares. The options granted have a ten-year contractual term and have a vesting schedule of either immediately, two years, or four years from the date of grant. Information with respect to stock options granted under this plan during the period ended June 30, 2013 is as follows:

	Number of shares		Weighted average exercise price per share
Options outstanding at December 31, 2012		8,000,000		$	0.095
Granted		-			-
Cancelled or Expired		-			-
Exercised		-			-
Options outstanding at June 30, 2013		8,000,000		$	0.095

There are currently no shares reserved for issuance under this plan.

2001 Plan

The 2001 Non-Qualified Stock Option Plan (the "2001 Plan") expired on January 31, 2011. The Company adopted the 2001 Plan on February 1, 2001 and filed Registration Statements on Form S-8 to register 120,000,000 shares of its common stock. Under the 2001 Plan, employees and consultants could have elected to receive their gross compensation in the form of options, exercisable at $0.001 per share, to acquire the number of shares of the Company's common stock equal to their gross compensation divided by the fair value of the stock on the date of grant. Information with respect to stock options granted under this plan during the period ended June 30, 2013 is as follows:

	Number of shares		Weighted average exercise price per share
Options outstanding at December 31, 2012		30,582	$	0.001
Granted		-		-
Cancelled or Expired		-		-
Exercised		-		-
Options outstanding at June 30, 2013		30,582	$	0.001

Fair value of issuances

The fair value of the Company's option grants under the 2012, 2011, and 2002 Plans were estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	June 30, 2013			June 30, 2012
Expected term (based upon historical experience)		5-6 years			<1 week
Expected volatility		130.36	%		115.86	%
Expected dividends		None			None
Risk free interest rate		0.01	%		0.08	%

The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the Company's common stock over the expected option term. The expected term was determined using the simplified method for estimating expected option life, which qualify as “plain-vanilla” options; and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.

Exercise Prices		Number of Shares		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value*
$	0.001		30,582		1.37	$	2,263
$	0.041		5,000,000		9.34	$	170,000
$	0.048		2,000,000		9.34	$	54,000
$	0.065		5,000,000		9.11	$	50,000
$	0.092		3,500,000		9.90	$	-
$	0.145		4,500,000		8.37	$	-
weighted			20,030,582		9.15	$	276,263

*The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.

Summary of all stock option plans during the period ended June 30, 2013 is as follows:

	Number of Shares		Weighted Average Price
Options outstanding at December 31, 2012		18,030,582	$	0.083
Granted		3,500,000	$	0.092
Cancelled		(1,500,000)	$	0.145
Exercied		-	$	-
Options outstanding at June 30, 2013		20,030,582	$	0.080