CAPITAL TRANSACTIONS

12 Months Ended

Dec. 31, 2012

Equity [Abstract]

CAPITAL TRANSACTIONS

NOTE J - CAPITAL TRANSACTIONS

Common stock

Effective April 30, 2010, the Company issued restricted stock grants to acquire an aggregate of 1,100,000 shares of restricted common stock to John DiBella and 300,000 stricted shares to an employee. The shares subject to the grant are subject to forfeiture as follows: 300,000 shares on April 30, 2013, 400,000 shares on April 30, 2014 and 200,000 shares on April 30, 2015, in the event they are no longer full time employees on such dates. The remaining 300,000 stock grants were subject to forfeiture as follows: (1) 100,000 shares on April 30, 2012(2)100,000 shares on April 30, 2013, and (3)100,000 shares on April 30, 2014. The stock grants were valued at $.38 per share and are amortized over the term of the stock grant. The securities may not be transferred absent registration or applicable exemption. On January 1, 2012, the Company vested 100% of the remaining unvested shares to John DiBella and recorded an expense of $209,000. The Company recorded the remaining unvested shares as prepaid expense of $19,000. As of December 31, 2012, the Company also recorded an expense of $38,000 for the employee portion of the vested shares and a prepaid expense of $19,000.

On July 22, 2011, the Company issued an aggregate of 300,000 shares of common stock to two consultants in consideration for marketing services. The shares were valued using the fair value of the shares on the date of issuance of $0.25 per share, for a total of $75,000.

On July 28, 2011, the Company issued 75,000 shares of common stock to a consultant in consideration for advisory services. The shares were valued using the fair value of the shares on the date of issuance of $0.28 per shares for a total of $21,000.

On September 28, 2011, the Company issued 24,000 shares of common stock to a consultant in consideration for advisory services. The shares were valued using the fair value of the shares on the date of issuance of $0.28 per shares for a total of $6,720.

On November 14, 2011, the Company issued 75,000 shares of common stock to a consultant in consideration for marketing services. The shares were valued using the fair value of the shares on the date of issuance, of $0.28 per share for a total of $21,000.

During the year ended December 31, 2011, the Company sold an aggregate of 800,000 shares of common stock and warrants to purchase an aggregate of 400,000 shares of common stock for $200,000, ($0.25, per share) to five investors. The warrants are exercisable at $0.60 per share through September 30, 2012.

On January 1, 2012, the Company issued an aggregate of 100,000 shares of common stock to a consultant in consideration of services to be provided for 18 months with a fair value of $10,000. The expense will be amortized over the life of the agreement. The Securities were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act. The securities may not be transferred absent registration or applicable exemption. As of December 31, 2012 the Company has $2,000 in prepaid stock compensation.

On January 1, 2012, the Company issued 250,000 shares of common stock to a consultant in consideration for consulting services with a fair value of $25,000. The expense was amortized over the six month life of the agreement. The shares of common stock were issued under the exemption from registration provided by Section 4(2) of the Securities Act. The shares issued contain a legend restricting their transferability absent registration or applicable exemption. These shares were fully earned as of December 31, 2012.

On July 1, 2012, the Company entered into a six month agreement with a consultant. As compensation for services provided, the Company issued 250,000 shares of common stock, with a fair value of $45,000. The expense is amortized over six month life of the agreement. As of December 31, 2012 these shares were fully earned.

Warrants and Options

In September 2011 the Company issued 400,000 warrants to investors to purchase an aggregate of 400,000 shares of common stock for a period of one year. The warrants expired in September 2012. The purchase price of these warrants are $0.60 per share. The Company calculated the fair value of the extended warrants by using the Black-Scholes option-pricing model with the following weighted average assumptions: no dividend yield for all the years; expected volatility of 55%; risk-free interest rate of 5% and an expected life of one year.

Information with respect to warrants outstanding and exercisable at December 31, 2012 is as follows:

	Number Outstanding	Range of Exercise Price	Number Exercisable
Balance, December 31, 2010	2,024,982	$0.83	2,024,982
Issued	400,000	$0.60	400,000
Expired	(2,024,982)	$0.83	(2,024,982)
Balance, December 31, 2011	400,000	$0.60	400,000
Issued	0	-	0
Expired	(400,000)	$0.60	(400,000)
Balance, December 31, 2012	-	-	-

Effective June 2, 2010, the Company issued options to Alberto DiBella and John DiBella to purchase 1,900,000 and 2,800,000 shares of restricted common stock, respectively. The options were exercisable at $0.68 per share for a period of three years from vesting date. The options contain a cashless exercise provision and vest in three annual tranches. Of the options issued to Alberto DiBella, 1,700,000 are exercisable commencing January 30, 2011, 100,000 are exercisable commencing January 30, 2012 and 100,000 are exercisable commencing January 30, 2013. Of the options issued to John DiBella, 2,600,000 are exercisable commencing on January 30, 2011; 100,000 are exercisable on January 30, 2012; and 100,000 are exercisable commencing January 30, 2013. The options were issued in satisfaction of accrued salary and expenses payable to John DiBella and Alberto DiBella in the approximate amounts of $1,046,000 and $693,000, respectively. The securities were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act. The securities may not be transferred absent registration or applicable exemption. In 2011, all options issued to Alberto DiBella in 2010 were vested. Effective January 1, 2012, the expiration date of the options issued to John DiBella was extended to June 2, 2018, and the exercise price of the options issued to John DiBella was reduced to $0.18 per share.

Effective November 14, 2011, the Company issued options to Alberto Di Bella and John A. Di Bella to purchase 1,900,000 each. The options are exercisable at $0.15 per share for a period of 5 years. They are vested immediately. The Company calculated the fair value of the stock options by using the Black Scholes option pricing model with the following weighted average assumptions: no dividend yield, expected volatility of 81.64%; risk free interest rate of 0.91% and an expected life of 5 years.The options were issued in satisfaction of accrued salary and expenses payable to John DiBella and Alberto DiBella in the approximate total amount of $337,479.

In January 2012, the Company modified the terms of 8,050,000 previously issued stock options to officers and employees. Per ASC Topic 718, this exchange of stock options was treated as a modification. The incremental value of $475,019, measured as the excess of the fair value of the modified award over the fair value of the original award immediately before the modification, and using the Black-Scholes option pricing model, was expensed immediately as all the options vested on the date of the exchange.

On January 10, 2012, the Company granted 950,000 stock options with a total fair value of $69,549 to an employee and a consultant. The shares vested immediately and were valued using the Black-Scholes option pricing model.

We used the following assumptions for options granted during the three months ended March 31, 2012:

Expected volatility: 115.31%

Expected lives: 3.5 to 5 Years

Risk-free interest rate: 0.490% - 0.8990%

Expected dividend yield: None

Information with respect to options outstanding and exercisable at December 31, 2012 is as follows:

	Number Outstanding	Range of Exercise Price	Number Exercisable
Balance, December 31, 2010	9,050,000	-	-
Issued	3,800,000	$0.15	6,250,000
Exercised	-	-	-
Expired	-	-	-
Balance, December 31, 2011	12,850,000	-	-
Issued	950,000	$0.20	12,650,000
Expired	(1,000,000)	$(0.40)	-
Balance, December 31, 2012	12,800,000	-	12,700,000

The following table summarizes information about the stock options outstanding at December 31, 2012:

Exercise Price	Number Outstanding at December 31, 2012	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Number Exercisable at December 31, 2012	Weighted Average Exercise Price
$0.15	5,800,000	5.58	0.15	5,800,000	$0.15
$0.18	6,050,000	4.18	0.18	5,950,000	$0.18
$0.20	950,000	4.03	0.20	950,000	$0.20
	12,800,000	-	-	12,700,000