12. Shareholders' Deficit (Tables)

9 Months Ended

Sep. 30, 2012

Shareholders Deficit Tables

Stock Options- Assumptions

The following assumptions were used for the Black Scholes calculation to determine this expense:

Estimated fair value of underlying common stock	$0.35 - $0.38
Remaining life	5.0
Risk-free interest rate	0.69% - 0.80%
Expected volatility	80% - 89%
Dividend yield	–

Stock Options - Activity

The following table sets forth the activity of our stock options:

	Options Outstanding									Options Exercisable
				Range of		Weighted Average Remaining		Weighted Average					Weighted Average Remaining		Weighted Average
	Options			Exercise		Life in		Exercise		Options			Life in		Exercise
	Outstanding			Prices		Years		Price		Exercisable			Years		Price
As of December 31, 2010		10,269,852			$0.14 - $3.50		2.4	$	0.94		8,512,684			2.0	$	0.94
Cancelled		(3,110,000	)		–		–	$	0.43		(3,110,000	)		–	$	0.00
Exercised
Granted		5,010,000		$	0.54		5.0	$	0.54		3,355,000			5.0	$	0.54
As of December 31, 2011		12,169,852			$0.14 - $1.50		3.2	$	0.49		8,757,684			3.2	$	0.40
Cancelled		(7,276,329	)		–		–		–		(4,660,994	)		–		–
Exercised		–			–		–		–		–			–		–
Granted		3,050,000			$0.35 - $0.38		4.8	$	0.36		734,333			4.8	$	0.36
As of September 30, 2012		7,943,523			$0.35 -$0.54		3.6	$	0.46		4,831,023			2.9	$	0.50

Warrants -Assumptions

The following assumptions were used for the Black Scholes calculation to determine this expense:

Estimated fair value of underlying common stock	$0.38 - $0.75
Remaining life	5.0
Risk-free interest rate	0.74% - 1.80%
Expected volatility	84% - 132%
Dividend yield	–

Warrants - Summary

A summary of the warrants:

	Warrants Outstanding								Warrants Exercisable
			Range of		Weighted  Average Remaining		Weighted Average				Weighted  Average Remaining		Weighted Average
	Warrants		Exercise		Life in		Exercise		Warrants		Life in		Exercise
	Outstanding		Prices		Years		Price		Exercisable		Years		Price
As of December 31, 2010		2,472,676		$1.00 - $2.00		4.4	$	1.37		2,472,676		4.4	$	1.37
Exercised		–		–		–		–		–		–		–
Granted		57,057,569		$0.65 - $1.00		4.5	$	0.75		57,057,569		4.5	$	0.75
As of December 31, 2011		59,530,245		$0.65 - $2.00		3.5	$	2.00		59,530,245		3.5	$	2.00
Exercised		–		–		–		–		–		–		–
Ratchet-down impact		56,991,667	$	0.30		–	$	0.30		56,991,667		–	$	0.30
Granted		14,363,330		$0.30 - $0.40		4.6	$	0.40		6,488,330		4.6	$	0.40
As of September 30, 2012		130,885,242		$0.30 - $2.00		3.7	$	0.40		123,010,242		3.7	$	0.40

Calculations of the ratchet-down impact

Calculations of the ratchet-down impact:

	Original					After Ratchet Down
	Shares  x		Strike  =		Aggregate Exercise Price		Shares  x		Strike  =		Aggregate Exercise Price
Series A warrants	21,750,000	$	0.65	$	14,137,500		47,125,000	$	0.30	$	14,137,500
Series B warrants	10,875,000	$	1.00	$	10,875,000		36,250,000	$	0.30	$	10,875,000
Placement agent warrant	3,600,000	$	0.65	$	2,340,000		7,800,000	$	0.30	$	2,340,000
Broker-dealer warrant	1,000,000	$	0.65	$	650,000		2,166,667	$	0.30	$	650,000
Advisory warrant	750,000	$	0.65	$	487,500		1,625,000	$	0.30	$	487,500
	37,975,000						94,966,667