Note 14 - Share-Based Payments

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 14 - Share-Based Payments

a)     2002 Employee Stock Option Plan

On November 6, 2002 the stockholders approved the adoption of The Company’s 2002 Employee Stock Option Plan. Under the Plan, options may be granted which are intended to qualify as Incentive Stock Options (“ISOs”) under Section 422 of the Internal Revenue Code of 1986 (the “Code”) or which are not (“Non-ISOs”) intended to qualify as Incentive Stock Options thereunder. The maximum number of options made available for issuance under the Plan are two million (2,000,000) options. The options may be granted to officers, directors, employees or consultants of the Company and its subsidiaries at not less than 100% of the fair market value of the date on which options are granted. The term of each Option granted under the Plan shall be contained in a stock option agreement between the Optionee and the Company.

b)     2008 Employee Stock Option Plan

The Company’s board of directors approved the adoption of the Company’s 2008 Incentive Stock Option Plan.. The maximum number of shares available for issuance under the Plan is 10,000,000. The options may be granted to officers, directors, employees or consultants of the Company and its subsidiaries at not less than 100% of the fair market value of the date on which options are granted. The term of each Option granted under the Plan shall be contained in a stock option agreement between the optionee and the Company.

No options were approved or issued in 2012. The board approved the issuance of options to purchase an aggregate 145,000 shares of the Company’s common stock to various employees, officers and directors of the company during December 31, 2011.

The Company recorded stock base compensation expense of $5,684 and $233,868 for the year ended December 31, 2012 and 2011, respectively under both plans.

We use the Black-Scholes option pricing model to estimate on the grant date the fair value of share-based awards in determining our share-base compensation. The following weighted-average assumptions were used for grants made under the stock options plans for the years ended December 31, 2011. No options issued in 2012.

	2011
Expected Volatility		176.1	%
Expected term		5 years
Fisk-Free interest rate		1.02	%
Dividend yield		0	%
Annual forfeiture rate		5	%
Weighted-average estimated fair value of options granted	$	0.10

Transactions involving stock options awarded under the Plan described above during the years ended December 31, 2012 and 2011

	Number of shares			Weighted Average Exercise price		Weighted Average Remaining  Contractual term in Years		Aggregate Intrinsic Value
Outstanding at December 31, 2010		8,043,000		$	0.08		6.8	$	237,000
Granted		145,000		$	0.10
Exercised		(20,000	)		0.08
Cancelled/expired		(731,500	)	$	0.08
Outstanding at December 31, 2011		7,436,500		$	0.08		5.6	$	282,000
Granted		–		$
Exercised		–		$
Cancelled/expired		(70,000	)	$	0.10
Outstanding at December 31, 2012		7,366,500		$	0.08		4.7	$	-
Vested and exercisable at December 31, 2012		7,193,167
Vested and exercisable at December 31, 2011		7,058,167

d)     Employee Stock Purchase Plan

In 2002 the Company established an Employee Stock Purchase Plan. The Plan is to provide eligible Employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions and to enhance such Employees ’ sense of participation in the affairs of the Company and its Designated Subsidiaries. It is the intention of the Company to have the Plan qualify as an “ Employee Stock Purchase Plan ” under Section 423 of the Internal Revenue Code of 1986. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. The maximum number of shares of the Company ’ s Common Stock which shall be made available for sale under the Plan shall be two million (2,000,000) shares. There were no shares issued under the plan in 2012 or 2011.