The Company has valued warrants at their date of issue utilizing the Black-Scholes option pricing model. The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the warrants depending on the date of the issue and their expected life. The expected life of warrants used was based on the term of the warrant. The Company determined the expected dividend rate based on the assumption and expectation that earnings generated from operations are not expected to be adequate to allow for the payment of dividends in the near future. The following weighted-average assumptions were utilized in the fair value calculations for warrants granted:

	Three Months Ended			Three Months Ended
	March 31, 2014			March 31,2013
Expected dividend yield		0	%		0	%
Expected stock price volatility		134	%		93-108	%
Risk-free interest rate		1.73-1.75	%		.14–2.60	%
Expected life of warrants	4.1-8.8 years			.9-9.8 years

	Number of Shares Remaining Warrants		Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2014		7,671,267	$	1.51
Warrants granted during 2014		11,862,000	$	.25
Warrants expired during 2014		(600,000)		.25
Outstanding at March 31,2014		18,933,267	$	.78	5.3 years	$	0
Exercisable at March 31,2014		18,139,250	$	.76	5.6 years	$	0

The weighted average fair value of warrants issued during three months ended March 31, 2014 and 2013 was $.25 and $.73, respectively. During the three months ended March 31, 2014, 11,878,000 warrants vested (646,375 vested for the three months ended March 31, 2013), and 600,000 warrants expired for the three months ended March 31, 2014. No options expired or were cancelled for the three months ended March 31, 2013.

For the three months ended March 31, 2014 and 2013, respectively, the Company recorded compensation costs of $4,962 and $126,420 for warrants issued to a consultant (now an employee) of the Company. The warrants have a ten year life, a $1.20 exercise price, and vest from six months to three years from grant date.

For the three months ended March 31, 2013, the Company recorded expenses totaling $62,623 associated with the repricing of 423,125 outstanding warrants awarded to a consultant (now an employee) of the company. No such expense was recorded for the three months ended March 31, 2014.