Common Stock Options and Warrants

9 Months Ended

Oct. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 9 - Common Stock Options and Warrants    

The Company's Stock Option Plan states that the exercise price of each option will be granted at an amount that equals the market value at the date of grant. All options vest at a time determined at the discretion of the Company's Board of Directors. All options expire if not exercised within 10 years from the date of grant, unless stated otherwise by the Board of Directors upon issuance.

The Company records compensation expense for the fair value of options granted under the Company's stock option plan. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model.

During the quarter ending April 30, 2012, the Company issued stock options of 2,500,000 to the officers and directors. The options were priced at $0.06 per share and expire five years from the date of issuance. The fair value of the option grant was estimated on the date of grant utilizing the Black-Scholes option pricing model. The fair value of these options was determined to be $99,924 based on the following assumptions: expected life of options of 5 years, expected volatility of 305.3%, risk-free interest rate of 1.01% and no dividend yield.

Options	Number of Shares	Weighted Average Exercise Price	Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Outstanding at February 1, 2012	13,450,000	$0.25	2.02 yrs	$0.00
Issued	2,500,000	$0.06	4.38 yrs	$0.00
Exercised	-	-	-
Expired/Cancelled	(1,700,000)	$0.10	-	$0.00
Outstanding at October 31, 2012	14,250,000	$0.23	2.57 yrs	$0.00
Exercisable at October 31, 2012	14,250,000	$0.23	2.57 yrs	$0.00

The following table summarizes information about stock options at October 31, 2012:

Range of Prices	Weighted Average Number Outstanding	Contractual Life	Weighted Average Exercise Price	Weighted Average Number Exercisable	Weighted Average Exercise Price
$0.05	2,000,000	3.55 yrs	$0.05	2,000,000	$0.05
$0.06	3,150,000	2.22 yrs	$0.06	3,150,000	$0.06
$0.08	500,000	2.22 yrs	$0.08	500,000	$0.08
$0.30	100,000	2.22 yrs	$0.30	100,000	$0.30
$0.40	4,000,000	.10 yrs	$0.40	4,000,000	$0.40
$0.60	2,000,000	3.10 yrs	$0.60	2,000,000	$0.60
$0.06	2,500,000	4.38 yrs	$0.06	2,500,000	$0.06

During the year ended January 31, 2011, the Company issued 6,626,486 warrants in connection with a private placement. The warrants are exercisable for a period of two years for $0.12 per share. However, if the common shares trade at over $0.18 per share in any 20-day period during the life of the warrants, the Company has the right to accelerate the expiration date of the warrants. Warrants in the amount of 2,859,820 were exercised by two shareholders in settlement of debt. During the nine months ended October 31, 2012, 3,766,666 warrants expired.

On June 19, 2012 the Company issued 2,000,000 shares of common stock and a warrant to purchase 1,000,000 shares of common stock at $0.05 per share within a three year period.

On August 31, 2012, in connection with a note payable, the Company entered into a Warrant Purchase Agreement with an unaffiliated accredited investor. As part of the terms of the note, the Company issued a five year warrant to the lender to purchase 6,814,000 shares of Company common stock, exercisable at $0.02 per share. The fair value of these warrants at the date of grant was $132,332 using a Black Scholes option pricing model and the following assumptions: expected life of warrants is five years, expected volatility rate of 194.81%, risk free rate of 0.59%, and an exercise price of $0.02.  The $132,332 was amortized to interest expense over the term of the bridge loan.    

On October 31, 2012, the Company had the following outstanding warrants:

Exercise Price	Number of Shares	Remaining Contractual Life	Exercise Price Times Number of Shares	Weighted Average Exercise Price	Aggregate Intrinsic Value
$0.05	1,000,000	2.63 yrs	$50,000	$0.05	$0.00
$0.02	6,814,000	4.84 yrs	$136,280	$0.02	$0.00