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 In 2000, the Board superseded that plan and created a new Stock Option Plan, pursuant to which it is authorized to grant options to purchase up to 1.5 million shares of common stock. On December 17, 2003, the Board, with approval of the stockholders, superseded this plan and created the 2003 Stock Option Plan (the “Plan”). Under the 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 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 comprehensive incentive compensation plan which will serve as the successor incentive compensation plan to the earlier plan, and provide the Company with an omnibus plan to design and structure grants of stock options, stock units, stock awards, stock appreciation rights and other stock-based awards for selected individuals in our employ or service. Our Board of Directors believes that the availability of (i) 20,000,000 new shares of our common stock, plus (ii) the number of shares of our common stock subject to outstanding grants under the 2003 Plan as of the date of the Annual Meeting, plus (iii) the number of shares of our common stock remaining available for issuance under the 2003 Plan but not subject to previously exercised, vested or paid grants, for issuance under the 2013 Plan.

The Plan is administered by a committee of the Board of Directors (“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.

FASB ASC 718-10-55, Staff Accounting Bulletin No. 107 (SAB 107) and Staff Accounting Bulletin No. 110 (SAB 110), regarding Share-Based Payments, express the views of the staff regarding the use of the “simplified” method in developing an estimate of expected term of ‘plain vanilla’ share options and allows usage of the simplified method for share option grants. The guidance allows public companies which do not have historically sufficient experience to provide a reasonable estimate to continue use of the “simplified” method for estimating the expected term of plain vanilla share option grants after December 31, 2007. SAB 110 is effective January 1, 2008. The Company has adopted the simplified method for estimating the expected term of share option grants because it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The simplified method is based on the average of the vesting tranches and the contractual life of each grant.

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 assumption used in calculating the fair value represents management’s best estimates and involve inherent uncertainties and judgment.

On July 16, 2012, the Company issued an option to purchase 200,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to a consultant. The fair value of options issued was $11,638. The Company used the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 133%, risk-free interest rate of 1.5% and expected option life of ten years. These options granted were fully vested as of the date of the agreement. As a result, the Company recorded $11,638 of consulting expense for the year ended December 31, 2012.

On November 21, 2012, the Company issued options to purchase an aggregate of 2,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to the Chief Executive Officer and the Chief Operating Officer. The fair value of options issued was $89,538 and was expensed immediately.

On November 21, 2012, the Company issued options to purchase an aggregate of 10,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to the five members of the Board of Directors. The fair value of options issued was $447,689 of which $223,844 was expensed immediately and the remainder was expensed over 2013. Expense for the three months ended March 31, 2013 was $55,194.

All of the options issued on November 21, 2012 were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 131%, risk-free interest rate of 1.7% and expected option life of ten years.

On January 22, 2013, the Company issued options to an employee to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years. The options vest as follows: 250,000 immediately, 250,000 in one year and 500,000 in two years The Company used the Black- Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 222%, risk-free interest rate of 1.9% and expected option life of ten years. The fair value of options issued was $99,972 of which $25,000 was expensed immediately and the remainder is being expensed over the vesting terms. The total expense for the three months ended March 31, 2014 and 2013 was $7,669, and $34,305, respectively.

On February 25, 2013, the Company issued options to an employee to purchase 500,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years. The options vest as follows: 200,000 in one year, 200,000 in two years and 100,000 in three years. The Company used the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 259%, risk-free interest rate of 1.9% and expected option life of ten years. The fair value of options issued was $89,998. The total expense recognized for the three months ended March 31, 2013, was $5,000. The options were cancelled during the three months ended June 30, 2013. The total expense recognized of $5,000 was reversed upon cancellation of the options.

On March 13, 2013, the Company issued an option to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to a member of the Board of Directors. The options vest 50% immediately and 50% on March 13, 2014. The Company used the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 235%, risk-free interest rate of 2.0% and expected option life of ten years. The fair value of the option issued was $439,963 of which $219,982 was expensed immediately and the remainder will be expensed over one year. The total expense for the three months ended March 31, 2014 and 2013 was $43,394 and $230,830, respectively.

On May 4, 2013, the Company issued an option to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to the a member of the Board of Directors. The options vest 50% immediately and 50% on May 4, 2014. The Company used the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 235%, risk-free interest rate of 1.78% and expected option life of ten years. The fair value of the option issued was $460,000 of which $230,000 was expensed immediately and the remainder will be expensed over one year. The total expense for the three months ended March 31, 2014 was $56,712.

On September 30, 2013, the Company issued an option to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $.15, with a term of ten years, to the Company’s Chief Operating Officer. The options vest 50% after the first year and 50% at the end of 24 months. The Company used the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of ranging from 268.4% to 272.8%, risk-free interest rate of 1.39% and expected option life ranging from 10 years. The fair value of the option issued was $99,840. The total expense for the three months ended March 31, 2014 was $18,492.

On December 2, 2013, the Company issued an option to purchase 1 million shares of the Company’s common stock at an exercise price of $.15, with a term of ten years, to the Company’s Chief Financial Officer. The options vest 50% after the first year and 50% at the end of 24 months. The Company used the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of ranging from 266.1%, risk-free interest rate of 2.64% and expected option life of 10 years. The fair value of the option issued was $79,994, which will be expensed over the vesting term. The total expense for the three months ended March 31, 2014 was $14,794.

On March 28, 2014, the Company issued options to purchase an aggregate of 6,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to one of the Board of Directors. The fair value of options issued was $599,893 of which all was expensed immediately.

All of the options issued on March 28, 2014 were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 229%, risk-free interest rate of 2.73% and expected option life of ten years.

On February 7, 2014, 6,000,000 options of the company were exercised as part of a cashless exercise of options. Based on a stock price of $.07 per share and an exercise price of $.05 per share 6,000,000 options were received and 1,714,285 shares of stock were issued.

On February 25, 2014, 6,000,000 options of the company were exercised by the Company’s Chief Executive Officer as part of a cashless exercise of options. Based on a stock price of $.06 per share and an exercise price of $.05 per share 6,000,000 options were received and 1,000,000 shares of stock were issued.

					Weighted Average
	Option/Warrant			Exercise	Exercise
	Shares			Price	Price
Outstanding, December 31, 2012		82,807,221		$0.00125 to $0.20	$	0.01

Granted		38,144,444		0.10 to 0.15		0.03
Exercised		(9,435,000	)	0.00125 - 0.07		-
Expired		-		-		-

Outstanding, December 31, 2013		111,516,665		0.00125 to 0.20		0

Granted		6,349,209		0.10		0.01
Exercised						-
Expired		(700,000	)	.07 -.20		-

Outstanding, March 31, 2014		117,165,874		$0.01 to $.20	$	0.10

Exercisable, March 31, 2014		117,165,874		$0.01 to $.20	$	0.10

Weighted Average Remaining Life,
Exercisable, March 31, 2014 (years)		6.5

					Weighted Average
	Option/Warrant			Exercise	Exercise
	Shares			Price	Price
Outstanding, December 31, 2012		15,766,667		0.00125 to 0.10	$	0.06000

Granted		45,500,000		0.05 - 0.15		0.04
Exercised		(900,000	)	0.00125 - 0.15		-
Expired/Returned		(500,000	)	-		-

Outstanding, December 31, 2013		59,866,667		.05 to .15		0.05

Granted		6,000,000		.05		.01
Exercised		(12,000,000	)	.05		.01
Expired/Returned		-		-		-

Outstanding, March 31, 2014		53,866,667		$0.05 to $0.15	$	0.05

Exercisable, March 31, 2014		45,366,667		$0.05 to $0.15	$	0.06

Weighted Average Remaining Life,
Exercisable, March 31, 2014 (years)		9.3