Warrant activity. We have accounted for warrants as equity instruments in accordance with EITF 00-19 (ASC 815-40) Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, and as such, will be classified in stockholders’ equity as they meet the definition of “…indexed to the issuer’s stock” in EITF 01-06 (ASC 815-40) The Meaning of Indexed to a Company’s Own Stock. In prior years, we estimated the fair value of the warrants using the Black-Scholes option pricing model based on assumptions at the time of issuance.

A summary of current warrant activity is as follows:

Stock options. For the three months ended March 31, 2013 and 2012, we issued -0- and 92,500 stock options, respectively. Stock options issued to members of our Board of Directors were -0- and 92,500 for the three months ended March 31, 2013 and 2012, respectively. For our Board of Directors, the stock options were valued at the fair market value of the services performed that resulted in an expense of $8,000 for the three months ended March 31, 2012.

In July 2012, we issued our Chief Financial Officer 100,000 stock options at an exercise price equal to the closing price of our common stock on the trading day prior to the grant date ($0.25). The stock options granted were calculated to have a fair value of $17,415 using the Black-Scholes option pricing model with the following assumptions:

The cost of the options issued to the members of our Board of Directors and our Chief Financial Officer have been classified as share based compensation for the three months ended March 31, 2013 and 2012, respectively.

A summary of stock option activity is as follows: