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NOTE 7 - STOCK OPTIONS

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

NOTE 7 - STOCK OPTIONS

NOTE 7 – STOCK OPTIONS

During the year ended December 31,2011, the Company recorded an expense of $18,188, equal to the estimated fair value of the options that are to be issued to the directors for serving on the board in 2011 at the date of grants. The fair market value was calculated using the Black-Scholes options pricing model, assuming approximately 5.0% risk-free interest, 0% dividend yield, 60% volatility, and expected life of three years.

During 2010 the Company issued stock options to various parties. The stock options allow the parties to purchase shares of the Company’s common stock at various prices per share per each individual option agreement. The options allow the various parties to purchase one share of its stock for each option. The options expire at various times through October 28, 2013 per each individual option agreement. The Company did not grant any registration rights with respect to any shares of common stock issuable upon exercise of the options. There were no forfeited options during 2010. During the year ended December 31, 2010, the Company recorded an expense of $42,543, equal to the estimated fair value of the options at the date of grants. The fair market value was calculated using the Black-Scholes options pricing model, assuming approximately 5.0% risk-free interest, 0% dividend yield, 60% volatility, and expected lives ranging from one to three years.

During 2010 we also issued 500,000 stock options exercisable at $0.05 per share to one person, who is not an officer or a director. No stock options have been issued in the year ended December 31, 2011.

During the year ended December 31, 2011, 1,160,804 warrants were exercised and 928,529 stock options were exercised for cash proceeds of $118,446 and $58,000, respectively. There are no outstanding warrants as of December 31, 2011.

Stock Options

Stock options outstanding and exercisable on December 31, 2011 are as follows:

Exercise Price per Share		Shares Under Option				Remaining Life in Years

Outstanding
$0.35			212,500				2.00
$0.30			300,000				.75
$0.20			300,000				1.00
$0.20			300,000				2.00
$0.11			150,000				3.30
$0.11			150,000				.75
$0.11			300,000				1.30
$0.05			15,450,000				0.67
$0.05			600,000				1.85

Exercisable
$0.35			212,500				2.00
$0.30			300,000				.75
$0.20			300,000				1.00
$0.20			300,000				2.00
$0.11			150,000				3.30
$0.11			150,000				.75
$0.11			300,000				1.30
$0.05			15,450,000				0.67
$0.05			600,000				1.85

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

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