The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s Common Stock issued to non-employees of the Company. These warrants were granted in lieu of cash compensation for services performed or financing expenses in connection with the sale of the Company’s Common Stock.

				Warrants
				Outstanding		Weighted				Exercisable
				Remaining		Average		Weighted		Weighted
Exercise		Number		Contractual		Exercise		Average		Average
Prices		Outstanding		Life (Years)		Price		Exercisable		Exercise Price
$	0.0400		3,000,000		1.92	$	0.0400		3,000,000	$	0.0400
$	0.0441		510,784		3.79	$	0.0441		510,784	$	0.0441
$	0.0475		3,789,489		4.79	$	0.0475		3,789,489	$	0.0475
$	0.0553		226,081		4.27	$	0.0553		226,081	$	0.0553
$	0.0600		2,000,000		0.39	$	0.0600		2,000,000	$	0.0600
$	0.0710		1,000,000		1.32	$	0.0710		1,000,000	$	0.0710
$	0.0900		6,900,000		2.92	$	0.0900		6,900,000	$	0.0900
$	0.1790		100,000		2.10	$	0.1790		100,000	$	0.1790
$	0.2140		100,000		2.60	$	0.2140		-	$	-
$	0.2431		40,106,951		4.80	$	0.2431		40,106,951	$	0.2431
$	0.5000		1,300,000		0.12	$	0.5000		1,300,000	$	0.5000
			59,033,305		4.10	$	0.1976		58,933,305	$	0.1963

	Number of Shares			Weighted Average Price Per Share
Balance, September 30, 2011		58,205,280		$	0.140
Granted		1,075,000			0.071
Exercised		(5,039,633	)		(0.045
Cancelled or expired		(8,400,000	)		(0.161	)
Balance at September 30, 2012		45,840,647		$	0.145
Granted		134,249,218			0.233
Exercised		(60,236,873	)		(0.170	)
Cancelled or expired		(60,819,687	)		(0.265	)
Balance, September 30, 2013		59,033,305			0.196

On October 31, 2011, warrants totaling 75,000 were issued in connection with services. The warrants are exercisable for three years from the date of issuance at an exercise price of $0.07 per share with vesting immediately. The fair value of the warrants of $1,363 was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 157.69% and risk free rate from 0.41% and were charged to operations during the year ended September 30, 2012.

On January 25, 2012, warrants totaling 1,000,000 were issued in connection with services. The warrants are exercisable for three years from the date of issuance at an exercise price of $0.071 per share and will vest in full on the first anniversary of the date of grant. The fair value of the warrants of $56,875 was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 147.53% and risk free rate from 0.81% and were charged to operations during the year ended September 30, 2012.

On November 7, 2012, 100,000 warrants were issued in connection with services. The warrants are exercisable on or after May 7, 2013 for three years at an exercise price of $0.179 per share. The fair value of the warrants of $13,238 was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 129.56% and risk free rate from 0.36% and were charged to current period operations.

On November 29, 2012, in connection the Initial Purchase Agreement, as described in Note H above, the Company issued an aggregate of 67,204,300 warrants to purchase the Company’s common stock exercisable for one to five years after defined date or events, at an exercise price of $0.2232 per share.

In March 2013, the Company issued an aggregate of 1,500,000 shares of its common stock in connection with the exercise of warrants at an exercise price of $0.10 per share with net proceeds of $150,000.

In April 2013, the Company issued 11,285,376 shares of its common stock in connection with the cashless exercise of 15,438,337 warrants to acquire the Company’s stock at a weighted average exercise price of $0.063 per share.

In May 2013, the Company issued 2,418,971 shares of its common stock in connection with the cashless exercise of 2,975,956 warrants to acquire the Company’s stock at a weighted average exercise price of $0.042 per share.

On May 7, 2013, 100,000 warrants were issued in connection with services. The warrants are exercisable on or after November 7, 2013 for three years at an exercise price of $0.214 per share. The fair value of the warrants of $15,018 was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 119.72% and risk free rate from 0.35% and were charged to current period operations.

As described in Note H above, on January 22, 2013, the Company exercised its option to repurchase 26,881,720 Series C Warrants issued to Crede under the Initial Purchase Agreement for $50,000. On April 25, 2013, under the Initial Purchase Agreement, Crede effected the cashless exercise of 10,752,688 Series A Warrants and 29,569,892 Series B Warrants, and the Company thereupon issued to Crede an aggregate of 31,257,045 shares of its Common Stock.

On July 19, 2013, in connection the Second Purchase Agreement, as described in Note H above, the Company issued an aggregate of 66,844,918 warrants to purchase the Company’s common stock exercisable for one to five years after defined date or events, at an exercise price of $0.2431 per share.

On August 14, 2013, the Company exercised its option to repurchase 26,737,967 Series C Warrants issued to Crede under the Second Purchase Agreement for $10,000, as described in Note H above.

In 2005, the Board of Directors and the holders of a majority of the outstanding shares of Common Stock approved the 2005 Incentive Stock Plan. In 2007, 2008 and 2012, the Board of Directors and holders of a majority of the outstanding shares of Common Stock approved various increases in the number of shares of Common Stock that can be issued as stock awards and stock options thereunder to an aggregate 350,000,000 shares and the number of shares of Common Stock that can be covered by awards made to any participant in any calendar year to 50,000,000 shares.

The 2005 Incentive Stock Plan is designed to retain directors, executives, and selected employees and consultants by rewarding them for making contributions to our success with an award of options to purchase shares of Common Stock. As of September 30, 2013, a total of 10,175,000 shares have been issued and options to purchase 125,208,825 shares have been granted under the 2005 Incentive Stock Plan.

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s Common Stock issued to employees of the Company under the 2005 Incentive Stock Plan:

	Options Outstanding					Options Exercisable
	Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.0500		24,000,000		1.65	$	0.0500		24,000,000	$	0.0500
$	0.0585		50,000,000		4.79	$	0.0585		50,000,000	$	0.0585
$	0.0600		30,000,000		1.76	$	0.0600		30,000,000	$	0.0600
$	0.0650		634,825		3.18	$	0.0650		634,825	$	0.0650
$	0.0680		4,770,000		3.17	$	0.0680		4,770,000	$	0.0680
$	0.0700		2,850,000		1.67	$	0.0700		1,900,000	$	0.0700
$	0.0900		1,500,000		2.92	$	0.0900		1,500,000	$	0.0900
$	0.1100		5,400,000		4.71	$	0.1100		5,400,000	$	0.1100
$	0.1799		2,099,367		4.17	$	0.1799		-	$	-
$	0.1930		100,000		4.75	$	0.1930		-	$	-
$	0.2000		100,000		4.63	$	0.2000		-	$	-
			121,454,192		3.23	$	0.063		118,204,825	$	0.0605

	Number of Shares			Weighted Average Exercise Price Per Share				Aggregate Intrinsic Value
Outstanding at October 1, 2011		120,650,000		$	0.060
Granted		6,558,825			0.067
Exercised		(500,000	)		(0.08	)
Cancelled or expired		(1,500,000	)		(0.08	)
Outstanding at September 30, 2012		125,208,825		$	0.060
Granted		2,299,367			0.181
Exercised		(5,979,000	)		(0.042	)
Cancelled or expired		(75,000	)		(0.060	)
Outstanding at September 30, 2013		121,454,192		$	0.063
Vested at September 30, 2013		118,204,825					$	0.136
Non-vested at September 30, 2013		3,429,367					$	0.055

On November 30, 2011, the Company granted an aggregate of 5,724,000 options to purchase the Company’s Common Stock at an exercise price of $0.068 per share for five years to directors with immediate vesting. The fair value of options was determined using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 156.65% and risk free rate of 0.96%.

On December 6, 2011, the Company granted an aggregate of 634,825 options to purchase the Company’s Common Stock at an exercise price of $0.065 per share for five years to two directors with immediate vesting. The fair value of options was determined using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 156.29% and risk free rate of 0.94%.

On February 8, 2012, the Company granted 100,000 options to purchase the Company’s Common Stock at an exercise price of $0.07 per share for five years to an employee with vesting at 25% each anniversary for the next four years. The fair value of options was determined using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 152.56% and risk free rate of 0.82%.

On March 16, 2012, the Company granted 100,000 options to purchase the Company’s Common Stock at an exercise price of $0.06 per share for five years to an employee with vesting at 25% each anniversary for the next four years. The fair value of options was determined using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 149.81% and risk free rate of 1.13%.

On November 30, 2012, the Company granted an aggregate of 2,099,367 options to non-employee board of director members (except Mr. Catenacci) under the 2005 Incentive Stock Plan. The options are exercisable at $0.1799 per share for five years, vesting one year from the date of issuance. The fair value of options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 146.33% and risk free rate of 0.82%.

On May 12, 2013, the Company granted an aggregate of 100,000 options to an employee under the 2005 Incentive Stock Plan. The options are exercisable at $0.20 per share for five years, vesting at 25% each anniversary for the next four years. The fair value of the options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 117.57% and risk free rate of 0.60%.

On May 15, 2013 the Company extended the term of 5,400,000 options that were set to expire to June 16, 2018. The Company recorded $408,605 of stock compensation expense for the year ended September 30, 2013 in connection with this modification as the incremental difference between fair value of the stock options immediately before and after modification.

On July 2, 2013 the Company granted an aggregate of 100,000 options to an employee under the 2005 Incentive Stock Plan. The options are exercisable at $0.193 per share for five years, vesting at 25% each anniversary for the next four years. The fair value of the options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 114% and risk free interest rate of 1.01%.

During the year ended September 30, 2013, the Company issued 4,639,483 shares of its Common Stock in connection with the cashless exercise of 5,954,000 options to acquire the Company’s stock at a weighted average of $.053 per share. The Company also issued 25,000 shares of its Common Stock in connection with the exercise of 25,000 options at $0.06 per share.

In accordance with his resignation agreement dated August 20, 2013, Mr. Jensen, the former Chief Financial Officer of the Company shall have one year from his resignation date to exercise his 20,500,000 vested options. There was no expense associated with this modification.

The Company recorded $1,926,129 (including the stock option modification) and $1,953,844 as stock compensation expense for the years ended September 30, 2013 and 2012, respectively for the vesting portion of all employee options outstanding. As of September 30, 2013, unrecorded compensation cost related to non-vested awards was $107,462, which is expected to be recognized through 2018.