Stock Options and Warrants

9 Months Ended

Sep. 30, 2013

Stock Options and Warrants [Abstract]

Stock Options and Warrants

9. Stock Options and Warrants

Stock Option - In August of 2013 the Company made stock option grants to management and officers to purchase in the aggregate 2,500,000 shares of the Company’s common stock. The previous grant of stock options to management and officers was made in 2008. Terms of the stock option grants require that the individuals continue employment with the Company over the vesting period of the option, fifty percent (50%) of which vested upon the date of the grant of the stock options and fifty percent (50%) of which will vest over 3 years from the date that the options were granted. The exercise price of the option is $0.46 per share, which was the closing price of the common stock at the date of the grants being approved. The Company determined the fair value of the stock option granted using the Black Scholes model and expenses this value monthly based upon the vesting schedule of the stock option award. For purposes of determining fair value, the Company used an average annual volatility of one hundred eighty nine percent (189%), which was calculated based on the closing price of the Company’s stock over the preceding five years. The risk free rate of interest used in the model was taken from a table of the market rate of interest for U. S. Government Securities for the date of the stock option awards and the effective term. The Company used the simplified method to determine the expected term of the options due to the lack of historical data. The total value of stock options granted to management and officers was determined using this methodology to be $1,125,000, half of which was expensed at the date of grant and the balance will be expensed over the next three years based on the stock option service period.

Warrant -  There were no warrants for services granted during the quarter ending September 30, 2013.