NOTE 10. COMMON STOCK

Additional Common Stock Approved and Issued

In October 2014, the shareholders approved an amendments to the Company’s Certificate of Incorporation to increase the Company’s authorized shares of common stock from 350,000,000 to 550,000,000 and to make effective a reverse stock split at a range of 1 for 10 through 1 for 50 to reduce the number of authorized shares of the Company’s common stock, subject to the Board of Director’s discretion.

During the year ended December 31, 2014, the Company sold 10,500,000 shares of common stock for proceeds of $525,000. Additionally the Company sold 500,000 shares of common stock that have not been issued to a shareholder and accordingly, the unissued shares have been reflected as common stock subscribed but not issued in the amount of $25,000 in the accompanying balance sheet as of December 31, 2014.

From January 1, 2015 through the filing date of this Annual Report, the Company issued a total of 4,400,000 shares of common stock for gross proceeds of $195,000.

Share-based Incentive Plans

During the years ended December 31, 2014 and 2013, the Company had three 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.

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 6,000,000 shares reserved for future issuance under this plan. Information with respect to stock options granted under this plan during the years ended December 31, 2014 and 2013 is as follows:

			Weighted average exercise price per
	Number of shares		share
Options outstanding at December 31, 2012		7,000,000	$	0.043
Granted		2,000,000	$	0.092
Cancelled		—	$	—
Exercised		—	$	—
Options outstanding at December 31, 2013		9,000,000	$	0.054
Granted		6,000,000	$	0.054
Cancelled		—	$	—
Exercised		—	$	—
Options outstanding at December 31, 2014		15,000,000	$	0.102

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 $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. The options granted have a 10 year contractual term and have vesting periods that range from one hundred percent on the date of grant to one third immediately, one third vesting in 18 months and the final on third vesting in 36 months from the date of the grant. Information with respect to stock options granted under this plan during the years ended December 31, 2014 and 2013 is as follows:

	Number of		Weighted average exercise
	shares		price per share
Options outstanding at December 31, 2012		3,000,000	$	0.015
Granted		2,250,000	$	0.115
Cancelled		(3,000,000)	$	0.145
Exercised		-	$	-
Options outstanding at December 31 2013		2,250,000	$	0.115
Granted		750,000	$	0.054
Cancelled		-	$	-
Exercised		-	$	-
Options outstanding at December 31, 2014		3,000,000	$	0.121

At December 31, 2014 there are no shares reserved for issuance under this plan.

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 years ended December 31, 2014, and 2013 is as follows:

	Number of		Weighted average exercise
	shares		price per share
Options outstanding at December 31, 2012		8,000,000	$	0.095
Granted		-	$	-
Cancelled or Expired		-	$	-
Exercised		-	$	-
Options outstanding at December 31, 2013		8,000,000	$	0.095
Granted		-	$	-
Cancelled or Expired		-	$	-
Exercised		-	$	-
Options outstanding at December 31, 2014		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 years ended December 31, 2014, and 2013 is as follows:

	Number of		Weighted average exercise
	shares		price per share
Options outstanding at December 31, 2012		30,582	$	0.001
Granted		-	$	0.001
Cancelled		(30,582)	$	0.001
Exercised		-		-
Options outstanding at December 31, 2013		-	$	-
Cancelled		-		-
Exercised		-	$	-
Options outstanding at December 31, 2014		-	$	-

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

Fair value of issuances

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

	2014	2013
Expected term (based upon historical experience)	5-6 years	5-6 years
Expected volatility	130.50% 42	127.95% - 132.84 %
Expected dividends	None	None
Risk free interest rate	1.0%-2.0 %	1.0%-2.0 %

No options were exercised during the year ended December 31, 2014.

The weighted-average grant date fair value of options granted during the year ended December 31, 2014 was $0.06 per share.

For the years ended December 31, 2014 and 2013, the Company recorded share-based compensation expense related to stock options of $247,807 and $367,591 and are included in operating expenses in the accompanying statements of comprehensive loss, respectively.

The Company had an aggregate of $250,845 of unrecognized share-based compensation expense for options outstanding as of December 31, 2014, which is expected to be recognized over a weighted average period of 1.28 years.

Information pertaining to options outstanding and exercisable at December 31, 2014 is as follows:

		Options Outstanding				Options Exercisable
				Weighted Average				Weighted Average
		Number of		Remaining Contractual		Number of		Remaining Contractual
Exercise Prices		Shares		Life (In Years)		Shares		Life (In Years)
$	0.041		5,000,000		7.79		5,000,000		7.79
$	0.048		2,000,000		7.94		2,000,000		7.94
$	0.054		6,750,000		9.89		3,650,625		9.89
$	0.065		5,000,000		7.61		5,000,000		7.61
$	0.092		3,500,000		8.39		3,046,250		8.39
$	0.145		3,000,000		6.87		3,000,000		6.87
$	0.160		750,000		8.97		426,875		8.97
			26,000,000		8.32		22,123,750		8.09

Summary of all stock option plans during the years ended December 31, 2014 and 2013 is as follows:

					Weighted
					Average
	Number of		Weighted		Remaining Contractual		Aggregate
	Shares		Average Price		Life (In Years)		Intrinsic Value
Options outstanding at December 31, 2012		18,030,582	$	0.083
Granted		4,250,000		0.104
Cancelled		(3,030,582)		0.144
Options exercisable at December 31, 2013		19,250,000		0.078
Granted		6,750,000		0.054
Options outstanding and expected to vest at December 31, 2014		26,000,000		0.072	$	8.32	$	33,000
Options exercisable at December 31, 2014		22,123,750	$	0.073	$	8.09	$	33,000