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9. STOCK OPTIONS AND WARRANTS

6 Months Ended

Jun. 30, 2013

Stock Options

No stock options have been granted in 2013. During the three and six months ended June 30, 2013, the Company recorded stock option based compensation expense of $85,085 and $170,170.

Warrants

During the six months ended June 30, 2013, pursuant to a private placement, the Company issued 6,450,667 warrants to purchase common stock which is based on the number of units sold in the private offering. These warrants have an exercise price of $0.20 per share and expire 1 year from the date of issuance.

As a part of the Company’s private placement, the Company issued 645,067 warrants in the six months ended June 30, 2013 to the placement agents. These warrants, valued at $130,402, are exercisable for 5 years at an exercise price of $0.25. The Company estimated the fair value of the warrants utilizing the Black-Scholes pricing model. The following table summarizes the assumptions used:

Assumptions
Expected term	5 yrs
Expected Volatility	130.96%
Risk free rate	0.14%
Dividend Yield	0.00%

There was no financial statement accounting effect for the issuance of these warrants as their fair value has been charged to Additional Paid-in-Capital as an offering cost and was offset by a credit to Additional Paid-in-Capital for their fair value when recording the issuance of these warrants.