NOTE 15 – STOCK OPTION PLAN AND WARRANTS

STOCK OPTION PLAN

The Company’s Incentive Compensation Plan (the “Plan”) provides for the issuance of qualified options to all employees and non-qualified options to directors, consultants and other service providers.

A summary of the status of stock options outstanding under the Plan as of March 31, 2017 and December 31, 2016 is as follows:

	3/31/2017					12/31/2016
	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding at beginning of year		10,111,023		$	0.53		11,103,275		$	0.78
Granted		-		$	-		3,020,134		$	0.03
Exercised		-		$	-		-		$	-
Expired and Cancelled		(1,392,715	)	$	0.66		(4,012,386	)	$	0.88
Outstanding, end of period		8,718,308		$	0.50		10,111,023		$	0.53

Exercisable at end of period		8,718,308		$	0.50		8,600,956		$	0.61

On May 17, 2016, each non-executive member of the Board at that time (Morris Garfinkle, Dan Jeffery and Edward B. Smith III) was granted pursuant to the Plan an option to purchase an aggregate 1,006,711 shares of common stock (the equivalent of $30,000 based on the common stock’s closing price of $0.0298 on the grant date) for a total of 3,020,134 shares of common stock at an exercise price of $0.0298 per share. These stock options vest 25% on date of grant and 25% every 90, 180 and 270 days subsequent to the grant date and expire ten years after the date of the grant. As of March 31, 2017, the unrecognized compensation cost related to all non- vested share- based compensation arrangements granted under the Plan was $0.

During the three months ended March 31, 2017 and March 31, 2016, the Company did not grant any stock options to the employees.

During the three months ended March 31, 2017 and March 31, 2016, there were no stock options exercised either for cash or on a cashless basis.

Stock options outstanding at March 31, 2017 are as follows:

			Weighted
			Average		Weighted
			Remaining		Average
	Options		Contractual		Exercise		Options
Range of Exercise Prices	Outstanding		Life		Price		Exercisable
$0.01 - $1.50		7,221,774		5.3	$	0.26		7,221,774
$1.51 - $3.00		1,496,534		0.8	$	1.67		1,496,534
$3.01 - $5.00				-				-
		8,718,308		4.5	$	0.50		8,718,308

Warrants

The Company and the holders of all of the Company’s issued and outstanding warrants (the “Warrants”) as of December 12, 2016 entered into agreements effective December 12, 2016 (the “Exchange Agreements”) pursuant to which they exchanged (the “Exchange”) their Warrants (which were initially exercisable for an aggregate of 52,752,869 shares of the Company’s common stock, par value $0.00005 per share (the “Common Stock”)) for an aggregate of 53,097,601 shares of Common Stock (which is the equivalent to the issuance of approximately one share of Common Stock for each Warrant exchanged). The holders of the shares of Common Stock received in exchange for the Warrants are prohibited from selling or otherwise transferring the shares of Common Stock until March 11, 2017. The foregoing description of the Exchange Agreements is qualified in its entirety by reference to the full text of the form of the Exchange Agreement, a copy of which is filed as Exhibit 10.1 to the Form 8-K Filed on December 12, 2016 and is incorporated by reference herein.

As of March 31, 2017, the Company had no warrants outstanding. The summary of the status of the warrants issued by the Company as of March 31, 2017 and December 31, 2016 are as follows:

	3/31/2017				12/31/2016
	Number of Warrants		Weighted Average Exercise Price		Number of Warrants			Weighted Average Exercise Price
Outstanding at beginning of year		-	$	-		50,957,780		$	0.52
Granted		-	$	-		6,750,000		$	0.64
Exercised		-	$	-		(57,707,780	)	$	0.53
Cashless Exercises		-	$	-		-			-
Expired and Cancelled		-	$	-		-		$	0.00
Outstanding, end of period		-	$	-		-		$	0.00

Exercisable at end of period		-	$	-		-		$	0.00

On March 2 2016, the Company issued a warrant to acquire 400,000 shares of the Common Stock, at an exercise price of $0.64 per share to Jonathan Kahn in conjunction with his $100,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights.

On March 11, 2016, the Company issued a warrant to acquire 400,000 shares of the Common Stock, at an exercise price of $0.64 per share to an accredited investor in conjunction with their $100,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights.

On March 17, 2016, the Company issued a warrant to acquire 400,000 shares of the Common Stock, at an exercise price of $0.64 per share to an entity controlled by Morris Garfinkle in conjunction with its $100,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights.

On March 17, 2016, the Company issued a warrant to acquire 200,000 shares of the Common Stock, at an exercise price of $0.64 per share to an entity controlled by Dan Jeffery in conjunction with its $50,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights.

On April 7, 2016, the Company issued two warrants to acquire a total of 400,000 shares of the Common Stock, at an exercise price of $0.64 per share to two accredited investors in conjunction with their total of $100,000 note investments. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights.

On April 8, 2016, the Company issued a warrant to acquire 2,000,000 shares of the Common Stock, at an exercise price of $0.64 per share to an accredited investor in conjunction with their $500,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights.

On April 22, 2016, the Company purchased 4,610,178 warrants from their holders for an aggregate price of $122,805.

On April 28, 2016 the Company issued a warrant to acquire 150,000 shares of the Common Stock, at an exercise price of $0.64 per share to an entity controlled by Dan Jeffery in conjunction with its $50,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights.

On July 14, 2016, the Company issued a warrant to acquire 2,000,000 shares of the Common Stock, at an exercise price of $0.64 per share to an accredited investor in conjunction with their $500,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights.

On July 21, 2016, the Company issued a warrant to acquire 600,000 shares of the Common Stock, at an exercise price of $0.64 per share to an accredited investor in conjunction with their $300,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights.

On November 4, 2016, the Company issued a warrant to acquire 200,000 shares of the Common Stock, at an exercise price of $0.64 per share to an accredited investor in conjunction with their $100,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights

During the quarter ended March 31, 2017, there were no warrants exercised for cash.