8. Warrants

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

NOTE 8 - Warrants

At September 30, 2012, we had 7,718,750 warrants outstanding and exercisable with a weighted average exercise price of $0.07. The outstanding warrants have expiration dates between November 2013 and May 2017.

The following is a summary of warrant activity for the nine month period ended September 30, 2012:

	Nine Month Period Ended
	September 30, 2012
				Wtd. Avg.
				Exercise
	Shares			Price
Outstanding at beginning of year		6,218,750		$	0.08
Granted		2,000,000			0.08
Exercised		-			-
Forfeited		(500,000	)		(0.25	)
Outstanding at September 30, 2012		7,718,750		$	0.07

In May, 2012, the Company issued a total of 2,000,000 warrants to the current note holders as consideration for restructuring of their existing promissory notes.  The warrants were valued using the Black-Scholes option pricing model resulting in a total value of $137,955 which was recorded as Deferred Financing Costs on the Balance Sheet and is being amortized to expense over the revised term of the notes.

During the three and nine months ended September 30, 2012, the Company recorded $18,397 and $60,142, respectively, in amortization of deferred financing costs. During the three and nine months ended September 30, 2011, the Company recorded $20,237 and $47,061, respectively, in amortization of deferred financing costs.