Preferred Stock

We are authorized to issue 1,000,000 shares of preferred stock with a par value of $0.01. Of the 1,000,000 shares of preferred stock:

As of September 30, 2015, there were no shares of Junior A, and Series A, B, C and E issued and outstanding. See our Annual Report on Form 10-K for the year ended December 31, 2014 for the pertinent disclosures of preferred stock.

Stock Options and Warrants

Our stockholders approved our amended 2005 Equity Incentive Plan (the “Plan”) pursuant to which an aggregate of 1,800,000 shares of our common stock were reserved for issuance upon exercise of stock options or other equity awards made under the Plan. Under the Plan, we may award stock options, shares of common stock, and other equity interests in the Company to employees, officers, directors, consultants, and advisors, and to any other persons the Board of Directors deems appropriate. As of September 30, 2015, options to acquire 1,720,750 shares were outstanding under the Plan with 79,250 shares available for future grant under the Plan.

As of September 30, 2015, options to acquire 10,000 shares are outstanding under the 1999 Non-qualified Stock Option Plan. No additional options may be granted under the 1999 Non-qualified Stock Option Plan.

On December 12, 2013 at the Company’s special meeting the shareholders approved the 2013 Equity Incentive Plan (the “2013 Plan”) pursuant to which 3,000,000 shares of our common stock were reserved for issuance upon exercise of stock options or other equity awards under the 2013 Plan. Under the Plan, we may award stock options, shares of common stock, and other equity interests in the Company to employees, officers, directors, consultants, and advisors, and to any other persons the Board of Directors deems appropriate. As of September 30, 2015 1,675,500 options have been granted under the 2013 Plan.

In connection with the convertible debentures issued in July 2015 and September 2015, we also issued warrants to the lenders to purchase an aggregate 5,857,142 shares of the Common Stock, at an exercise price of $0.40 per share, expiring five years after the issuance date. We issued 1,171,427 warrants to the placement agent who assisted with these convertible debentures. The placement agent’s warrants have the same terms as the warrants issued to the lenders.

The following tables summarize information concerning options and warrants outstanding and exercisable:

As of September 30, 2015, the total estimated fair value of unvested stock options to be amortized over their remaining vesting period was $165,176. The non-cash, stock-based compensation expense associated with the vesting of these options is expected to be $22,492 for the remainder of 2015, $83,440 in 2016 and $59,244 in 2017.

Common Stock Issuances

With respect to the convertible debenture for $223,000 signed by the Company on December 4, 2013, a lender, with the prior approval of the Company, chose to convert a portion of the outstanding note balance into shares of the Company’s common stock, and to extend the note for approximately 45 days after each conversion, as follows:

On January 14, 2015 $25,000 was converted into 100,000 shares of the Company’s common stock.

On February 25, 2015 $38,000 was converted into 140,741 shares of the Company’s common stock.

On April 10, 2015 $35,000 was converted into 140,000 shares of the Company’s common stock.

On May 29, 2015 $35,000 was converted into 140,000 shares of the Company’s common stock.

On July 21, 2015 $20,000 was converted into 80,000 shares of the Company’s common stock.

On August 13, 2015 $40,000 was converted into 160,000 shares of the Company’s common stock.

On September 25, 2015 $30,000 was converted into 120,000 shares of the Company’s common stock.

For each extension, the Company paid a fee of $13,000, $13,000, $10,000, and $8,000, respectively. This note was paid off in its entirety on November 5, 2015.

During the nine months ended September 30, 2015, the Company issued 305,000 shares with a fair value of $80,050 for services.

On August 14, 2015, the Company closed a Securities Exchange Agreement with Everest Investments Holdings of Warsaw, Poland under which Everest purchased 1,000,000 shares of the Company’s restricted Common Stock at a purchase price of $0.50/share. In exchange, the Company received 601,500 shares of Everest Investments (“Everest”), a publicly-traded company on the Main Market of the Warsaw Stock Exchange. The shares of Everest were valued at approximately $400,000 as of the closing date.

With respect to the convertible debenture for $150,000 signed by the Company on June 4, 2014, a lender, with prior approval of the Company, chose to convert a portion of the outstanding note balance into shares of the Company’s common stock, and to extend the note for approximately 30 days after each conversion, as follows:

On February 18, 2015 $25,000 was converted into 100,000 shares of the Company’s common stock.

On March 18, 2015 $22,500 was converted into 90,000 shares of the Company’s common stock.

On March 31, 2015 $27,500 was converted into 110,000 shares of the Company’s common stock.

On April 17, 2015 $30,000 was converted into 120,000 shares of the Company’s common stock.

For each extension, the Company paid a fee of $10,000, $0, $0, and $0. This note was paid off in its entirety on July 14, 2015.

With respect to the convertible debenture for $75,000 signed by the Company on November 10, 2014, a lender, upon the request of the Company, on June 8, 2015 agreed to extend the conversion date of the note until July 20, 2015. The lender received 40,000 shares of the Company’s common stock in exchange for the extension. The Company recorded $10,000 to interest expense for this transaction. This note was paid off in its entirety on July 24, 2015.