5.	STOCK BASED COMPENSATION

Options to directors, officers and employees

The Company maintains, as adopted by the board of directors, the 2010 Incentive Stock Plan and the 2011 Incentive Stock Plan (the plans) providing for the issuance of up to 3,000,000 options to employees, officers, directors or consultants of the Company. Incentive stock options granted under the plans may only be granted with an exercise price of not less than fair market value of the Company’s common stock on the date of grant (110% of fair market value for incentive stock options granted to principal stockholders). Non-qualified stock options granted under the plans may only be granted with an exercise price of not less than 85% of the fair market value of the Company’s common stock on the date of grant. Awards under the plans may be either vested or unvested options. The unvested options vest ratably over eight quarters for options with a five year term and after one year for options with a two year term.

In addition to the plan, the Company has granted, on various dates, stock options to directors, officers and employees to purchase common stock of the Company. The terms, exercise prices and vesting of these awards vary.

The following table summarizes option activity for directors, officers and employees:

	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Term in Months
Outstanding at January 1, 2010		-		$	-	$	-		-
Granted		4,940,000			0.56		0.33		81
Exercised		-			-		-		-
Forfeited or expired		-			-		-		-
Outstanding at December 31, 2010		4,940,000		$	0.56	$	0.33		77
Exercisable at December 31, 2010		1,854,625		$	0.53	$	0.32		75
Granted		3,375,000			0.63		0.28		54
Exercised		(29,750	)		0.41		0.26		50
Forfeited or expired		-			-		-		-
Outstanding at June 30, 2011		8,285,250		$	0.59	$	0.31		64
Exercisable at June 30, 2011		2,788,125		$	0.55	$	0.30		63

The Company recorded $266,274, $588,201 and $872,215 compensation expense for stock options to directors, officers and employees for the six months ended June 30, 2011, the year ended December 31, 2010 and the period from inception (February 20, 2007) to June 30, 2011, respectively. As of June 30, 2011, unrecognized compensation expense of $1,702,406 is related to non-vested options granted to directors, officers and employees which is anticipated to be recognized over the next 64 months, commensurate with the vesting schedules.

Options to consultants
The Company has also granted, on various dates, stock options to purchase common stock of the Company to. consultants for services provided to the Company. The terms, exercise prices and vesting of these awards vary.

The following table summarizes option activity for consultants:

	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Term in Months
Outstanding at January 1, 2010		-	$	-	$	-		-
Granted		810,000		0.67		0.23		36
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at December 31, 2010		810,000	$	0.67	$	0.23		32
Exercisable at December 31, 2010		380,000	$	0.63	$	0.22		31
Granted		70,000		0.59		0.18		31
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at June 30, 2011		880,000	$	0.66	$	0.23		26
Exercisable at June 30, 2011		595,000	$	0.64	$	0.22		26

The Company recorded $46,565, $82,900 and $129,465 compensation expense for stock options to consultants for the six months ended June 30, 2011, the year ended December 31, 2010 and the period from inception (February 20, 2007) to June 30, 2011, respectively. As of June 30, 2011, unrecognized compensation expense of $69,333 is related to non-vested options granted to consultants which is anticipated to be recognized over the next 26 months, commensurate with the vesting schedules.

Warrants to accredited investors

Since December 2010, common stock sold by the Company has included common stock purchase warrants to acquire shares of common stock of the Company. For each ten shares sold, each investor received a warrant to purchase five shares of common stock for a period of two years at an exercise price of $0.80 per share. The securities were offered and sold to the investors in a private placement transactions made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 (the “Securities Act”) and/or Rule 506 promulgated under the Securities Act. The investors are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act.

The following table summarizes warrant activity for accredited investors:

	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Term in Months
Outstanding at January 1, 2010		-	$	-	$	-		-
Granted		785,001		0.80		0.11		24
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at December 31, 2010		785,001	$	0.80	$	0.11		24
Exercisable at December 31, 2010		785,001	$	0.80	$	0.11		24
Granted		4,164,559		0.80		0.11		24
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at June 30, 2011		4,949,560	$	0.80	$	0.11		22
Exercisable at June 30, 2011		4,949,560	$	0.80	$	0.11		22

The Company recorded $460,316, $86,350 and $546,666 compensation expense for stock warrants to accredited investors for the six months ended June 30, 2011, the year ended December 31, 2010 and the period from inception (February 20, 2007) to June 30, 2011, respectively. There is no unrecognized compensation expense for these warrants because they are fully vested at date of grant.

Warrants to placement agent and consultants

The Company has compensated the placement agent for assisting in the sale of the Company’s securities by paying the placement agent commissions and issuing the placement agent common stock purchase warrants to purchase shares of the Company’s common stock. The warrants have a five year term and various exercise prices.

The Company has also granted, on various dates, stock warrants to purchase common stock of the Company to. consultants for services provided to the Company. The terms, exercise prices and vesting of these awards vary.

The following table summarizes warrant activity for the placement agent and consultants:

	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Term in Months
Outstanding at January 1, 2010		614,680	$	0.39	$	0.18		60
Granted		3,103,304		0.64		0.21		57
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at December 31, 2010		3,717,984	$	0.60	$	0.21		52
Exercisable at December 31, 2010		2,617,984	$	0.61	$	0.19		51
Granted		832,911		0.60		0.27		60
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at June 30, 2011		4,550,895	$	0.60	$	0.22		48
Exercisable at June 30, 2011		3,760,895	$	0.60	$	0.21		48

The Company recorded $292,406, $497,528 and $789,934 compensation expense for stock warrants to the placement agent and consultants for the six months ended June 30, 2011, the year ended December 31, 2010 and the period from inception (February 20, 2007) to June 30, 2011, respectively. As of June 30, 2011, unrecognized compensation expense of $207,825 is related to non-vested warrants granted to consultants which is anticipated to be recognized over the next 49 months, commensurate with the vesting schedules. There is no unrecognized compensation expense for the placement agent warrants because they are fully vested at date of grant.

Warrants to directors and officers

The Company has issued to certain directors and officers common stock purchase warrants to acquire shares of common stock at an exercise price of $2.00 per share for a period of five years.

The following table summarizes warrant activity for directors and officers:

	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Term in Months
Outstanding at January 1, 2010		-	$	-	$	-		-
Granted		1,400,000		2.00		0.13		60
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at December 31, 2010		1,400,000	$	2.00	$	0.13		59
Exercisable at December 31, 2010		1,400,000	$	2.00	$	0.13		59
Granted		1,500,000		2.00		0.09		60
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at June 30, 2011		2,900,000	$	2.00	$	0.11		56
Exercisable at June 30, 2011		2,900,000	$	2.00	$	0.11		56

The Company recorded $133,800, $182,000 and $315,800 compensation expense for stock warrants to directors and officers for the six months ended June 30, 2011, the year ended December 31, 2010 and the period from inception (February 20, 2007) to June 30, 2011, respectively. There is no unrecognized compensation expense for these warrants because they are fully vested at date of grant.