Quarterly report pursuant to Section 13 or 15(d)

NOTE 9 - STOCK OPTIONS

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NOTE 9 - STOCK OPTIONS
6 Months Ended
Jun. 30, 2014
Disclosure Text Block Supplement [Abstract]  
Shareholders' Equity and Share-based Payments [Text Block]
NOTE 9– STOCK OPTIONS

In February 2014, the Company granted 1,500,000 incentive stock options with an exercise price of $0.15 per option to certain non-executive employees under the 2004 Stock Incentive Plan.  Approximately 750,000 of the options vest immediately with the remaining 50% vesting ratably over a three-year period.  The Company estimated the fair value of each option using the Black Scholes option-pricing model with the following weighted-average assumptions: expected dividend yield of 0.0%, risk-free interest rate of 0.71%, volatility at 353.95% and an expected life of 5 years. The Company estimates the forfeiture rate based on historical data. Based on an analysis of historical information, the Company has applied a forfeiture rate of 15%. As a result, the Company estimated the value of these options at $115,488.

In May 2014, the Company granted 600,000 incentive stock options with an exercise price of $0.15 per option to Mr. Alan H. Hardy (see Note 5) under the 2004 Stock Incentive Plan. The Company recognizes compensation cost on awards on a straight-line basis over the vesting period, approximately five years. The Company estimated the fair value of each option using the Black Scholes option-pricing model with the following weighted-average assumptions: expected dividend yield of 0.0%, risk-free interest rate of 1.68%, volatility at 328.76% and an expected life of 5 years. The Company estimates the forfeiture rate based on historical data. Based on an analysis of historical information, the Company has applied a forfeiture rate of 15%. As a result, the Company estimated the value of these options at $77,981.

For the three and six months ended June 30, 2014, share-based compensation was $51,785 and $63,069, as compared to $4,404 and $8,808 for the three and six months ended June 30, 2013.