NOTE 11 – STOCK OPTIONS

During 1999, the Board of Directors (“Board”) of the Company adopted, with the approval of the stockholders, a Stock Option Plan. In 2000, the Board superseded that plan and created a new Stock Option Plan, pursuant to which it is authorized to grant options to purchase up to 1.5 million shares of common stock. On December 17, 2003, the Board, with approval of the stockholders, superseded the 2000 plan and created the 2003 Stock Option Plan (the “2003 Plan”). Under the 2003 Plan the Company is authorized to grant options to purchase up to 18,000,000 shares of common stock to the Company’s employees, officers, directors, consultants, and other agents and advisors. The Plan is intended to permit stock options granted to employees under the Plan to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the 2003 Plan, which are not intended to qualify as Incentive Stock Options, are deemed to be non-qualified options (“Non-Statutory Stock Options”).

During 2013, our Board adopted a new omnibus incentive compensation plan (the “2013 Plan”) which will serve as the successor incentive compensation plan to the 2003 Plan, and will provide the Company with an comprehensive plan to design and structure grants of stock options, stock units, stock awards, stock appreciation rights and other stock-based awards for our employees, non-employee directors and certain consultants and advisors. Our Board of Directors believes that the availability of (i) 20,000,000 new shares of our common stock, plus (ii) the 74,004 shares of our common stock available for issuance under the 2003 Plan, will be sufficient to meet the objective.

As of March 31, 2015, there are 22,725,996 options that have been issued, and 15,274,004 options that are available to be issued under the Plan.

The 2013 Plan is administered by a committee of the Board (“Stock Option Committee”) which determines the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan.

In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company). The aggregate fair market value (determined at the time of the grant) of stock for which an employee may exercise Incentive Stock Options under all plans of the company shall not exceed $1,000,000 per calendar year. If any employee shall have the right to exercise any options in excess of $100,000 during any calendar year, the options in excess of $100,000 shall be deemed to be Non-Statutory Stock Options, including prices, duration, transferability and limitations on exercise.

The Company issued Non-Statutory Stock Options pursuant to contractual agreements with non-employees. Options granted under the agreements are expensed when the related service or product is provided.

Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value represent management’s best estimates and involve inherent uncertainties and judgments.

Option expense for the three months ended March 31, 2015 was ($54,834).

The following tables summarize non-employee stock option/warrant activity of the Company since December 31, 2014:


	Option/Warrant Shares		Exercise Price		Weighted Average Exercise Price
Outstanding, December 31, 2014		121,165,874	$	0.01 - $0.20	$	0.10
Granted		—		—		—
Exercised		—		—		—
Expired		—		—		—

Outstanding, March 31, 2015		121,165,874	$	0.01 to $0.20	$	0.10

Exercisable, March 31, 2015		121,165,874	$	0.01 to $0.20	$	0.10

Weighted Average Remaining Life, Exercisable, March 31, 2015 (years)		5.5

A summary of incentive stock option transactions for employees since December 31, 2014 is as follows:


	Option/Warrant Shares			Exercise Price		Weighted Average Exercise Price
Outstanding, December 31, 2014		53,866,667		$	0.05 - $0.15	$	0.05
Granted		—			—		—
Exercised		—			—		—
Expired/Returned		(1,000,000	)		0.15		—

Outstanding, March 31, 2015		52,866,667		$	0.05 to $0.15	$	0.05

Exercisable, March 31, 2015		52,866,667		$	0.05 to $0.15	$	0.06

Weighted Average Remaining Life, Exercisable, March 31, 2015 (years)		9.0