[1]

On April 27, 2009, in an effort to preserve the Company's cash and reduce outstanding payables, the Board offered to officers and board members an option ("Option") to purchase 485,100 shares of our common stock in lieu of cash payment to reduce amounts owed by the Company. The Options were issued pursuant to the Company's 2007 Equity Incentive Plan with an exercise price of $0.50 cents a share, an amount which was $0.20 per share above the $0.30 per share closing price of the Company's common stock on April27, 2009, and had an expiration date of April 27, 2012. The Options issued to Board members Dennis P. Calvert and Kenneth R. Code were issued at an exercise price of $0.55 per share. In consideration of the circumstances in which the Options were issued, and the fact that the price of the Company's common stock was less than the strike price of the Options, the Board extended the expiration date of the Options by a period of seven years, to expire on April 27, 2019. The fair value of the Option totaled $218,295 and was recorded as selling, general and administrative expense. On July 5, 2012, our independent board members were issued options to purchase an aggregate 435,161 shares of our common stock at $0.36 per share in exchange for a reduction of $104,439 in accrued and unpaid obligations for their services on the board of directors. The share price of our common stock on July 5, 2012 was $0.32 per share. These options are fully vested and expire ten years from the date of issuance, July 5, 2022. The fair value of the options was an aggregate $152,585, resulting in additional $48,146 of selling, general and administrative expense in the year ended December 31, 2013.

[2]

On April 9, 2012, we issued an option to purchase 300,000 shares of common stock to our Chief Financial Officer in exchange for his services pursuant to the April 2012 extension of his engagement agreement with an exercise price of $0.35 per share, resulting in $105,000 in selling, general and administrative expense. The option expires April 9, 2022. On July 1, 2012, we recorded the issuance of an option to purchase an aggregate 46,667 shares of our common stock to the independent members of our Board of Directors, pursuant to the terms of the 2007 Equity Plan which calls for an automatic issuance of an option to a new board of director and concurrently with the annual stockholders meeting to our returning board of directors. The options vest after a period of one year from the date of grant, expires ten years from the date of issuance, and 6,667 is exercisable at $0.34 per share and 40,000 shares is exercisable at $0.40 per share, the price of our common stock on the grant date. The fair value of these options totaled $15,067 and was recorded as selling, general and administrative expense.

[3]

On April 27, 2009, in an effort to preserve the Company's cash and reduce outstanding payables, the Board offered to third parties an option ("Option") to purchase 257,035shares of our common stock in lieu of cash payment to reduce amounts owed by the Company. The Options were issued pursuant to the Company's 2007 Equity Incentive Plan with an exercise price of $0.50 cents a share, an amount which was $0.20 per share above the $0.30 per share closing price of the Company's common stock on April 27, 2009, and had an expiration date of April 27, 2012. In consideration of the circumstances in which the Options were issued, and the fact that the price of the Company's common stock was less than the strike price of the Options, the Board extended the expiration date of the Options by a period of seven years, to expire on April 27, 2019. The fair value of the Option totaled $115,666 and was recorded as selling, general and administrative expense during the year-ended December 31, 2013.

[4]

On July 18, 2012, an option was issued to a consultant, in accordance with the service agreement, to purchase an aggregate 200,000 shares of our common stock. Of this amount 50,000 vested upon issuance exercisable at $0.50 per share; 50,000 vest January 18, 2013 at an exercise price of $0.75 per share; 50,000 vest July 18, 2013 at an exercise price of $1.00 per share; and the remaining 50,000 vest January 18, 2014 at an exercise price of $1.25 per share. The share price of our common stock on the date of issuance was $0.28 per share and resulted in a fair value of $56,000, of which $14,000 was recorded as selling, general and administrative expense during the year ended December 31, 2013, and the remaining will be expensed ratably per the vesting schedule. These options expire ten years from the date of issuance, July 18, 2022.