
	Nine Months Ended September 30, 2013		Weighted Average Exercise Price
Options outstanding, beginning of the period	1,404,550	$	.034

Options granted during the period	2,790,348		.031

Options canceled, expired and forfeited during the period	(879,848)		.039


Options outstanding, end of the period	3,315,050	$	.030

The Company does not have a written employee stock option plan. The Company has historically granted only employee stock options with an exercise price equal to the market price of the Company’s stock at the date of grant, a contractual term of ten years, and a vesting period of three years ratably on the first, second and third anniversaries of the date of grant (with limited exceptions).

All employee stock options granted during the nine months ended September 30, 2013 were nonqualified stock options. Stock-based compensation is measured at the grant date, based on the calculated fair value of the option, and is recognized as an expense on a straight-line basis over the requisite employee service period (generally the vesting period of the grant).

During the nine months ended September 30, 2013, 2,790,348 options were issued and the fair values are estimated at the date of grant using the Black-Scholes option pricing model. Stock-based compensation expense for the three and nine months ended September 30, 2013 was $23,759 and $45,880, respectively. Stock-based compensation expense for the three and nine months ended September 30, 2012 was $842 and $2,434, respectively.

The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted during the nine months ended September 30, 2013:

Schedule of Common Stock Purchase Warrant and Non-employee Stock Option Activity


	Nine Months Ended September 30, 2013		Weighted Average Exercise Price
Warrants and non-employee stock options outstanding, beginning of the period		565,000	$	.005

Warrants and non-employee stock options granted during the period		250,000		.003

Warrants and non-employee stock options outstanding, end of the period		815,000		.004

During the nine months ended September 30, 2013, 250,000 warrants were issued for consulting services. The fair value of the granted warrants are estimated at the date of grant using the Black-Scholes option pricing model and $6,182 of warrants expense was recognized for the nine months ended September 30, 2013.

The Black-Scholes option pricing model was used with the following weighted-average assumptions for warrants granted during the nine months ended September 30, 2013: