NOTE 6 COMMON STOCK WARRANTS AND OPTIONS

9 Months Ended

Sep. 30, 2011

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

NOTE 6  COMMON STOCK WARRANTS AND OPTIONS

Warrants

All outstanding warrants were either exercised or expired unexercised prior to December 31, 2009, thus there are no warrants outstanding as of September 30, 2011 or December 31, 2010.  

Options

In March 2011, the Company granted options for the purchase of 150,000 shares of common stock to an individual for accounting related services to be performed through December 30, 2011, which do not vest until such date.  The options have an exercise price of $0.14 per share, and are exercisable for up to five years.  The grant date fair value of these options was $20,042, in connection with which the Company recognized $6,380 and $13,731 of expense during the three and nine months ended September 30, 2011, respectively.  The remaining $6,311 will be recognized between October 1, and December 30, 2011.

In March 2011, the Company granted options for the purchase of 100,000 shares of common stock to an individual for web and press support services to be performed through December 30, 2011, which do not vest until such date. The options have an exercise price of $0.14 per share, and are exercisable for up to five years.  The grant date fair value of these options was $13,361, in connection with which the Company recognized $4,254 and $9,155 of expense during the three and nine months ended September 30, 2011, respectively.  The remaining $4,206 will be recognized between October 1, and December 30, 2011.

In March, 2010, the Company granted options for the purchase of 250,000 shares of common stock to an individual for research and development consulting services to be performed for the period of April 1, 2010 through September 30, 2010.  The options have an exercise price of $0.19 per share, and are exercisable for up to five years.  The grant date fair value of these options was $46,094, in connection with which the Company recognized $46,094 of expense during the nine months ended September 30, 2010.  

In July 2010, the Company granted options for the purchase of a total of 3,500,000 shares of common stock to certain board members and employees of the Company as additional compensation for work performed.  These options have an exercise price of $0.20 per share, are exercisable for up to five years, but do not vest until the Company has achieved commercial sales.  As of September 30, 2011, none of these options had vested.  The grant date fair value of these options was $710,577, and will be recorded in the future once the Company has achieved commercial sales.

Also, in July 2010, the Company granted options for the purchase of 1,000,000 shares of common stock to a director of the Company in lieu of an actual stock grant for his services as a board member (see Note 7 for additional discussion on common shares issued to other board members for board service).  These options have an exercise price of $0.20 per share, are exercisable for up to five years, and became fully vested on the date of the grant.  The grant date fair value of these options was $203,021 and has been recorded as board compensation for the nine months ended September 30, 2010.

In August 2010, the Company granted options for the purchase of 250,000 shares of common stock to an outside consultant for patent work performed on behalf of the Company.  These options have an exercise price of $0.27 per share, are exercisable for up to five years, and had no vesting provisions.  The grant date fair value of these options was 67,465 and has been capitalized to patent costs as of September 30, 2010, which costs are being amortized over the expected life of the patent.

In September 2010, the Company granted options for the purchase of 250,000 shares of common stock to an outside consultant in connection with extending his consulting agreement with the Company through September 1, 2011.  These options have an exercise price of $0.275 per share, are exercisable for up to five years, but do not vest until the Company has achieved commercialization and sales of the AsepticSure™ product.  As of September 30, 2011, none of these options had vested.  The grant date fair value of these options was $65,067, and will be recorded in the future once the Company has achieved the required commercial sales.

For the nine months ended September 30, 2011, the Company estimated the fair value of the stock options at the date of the grant, based on the following weighted average assumptions:

Risk-free interest rate		2.43	%
Expected life	5 years
Expected volatility		176.45	%
Dividend yield		0.00	%

A summary of the status of the Company’s outstanding options as of September 30, 2011 and changes during the nine months ended is presented below:

	Shares		Weighted Average Exercise Price
Outstanding, beginning of period		7,750,000	$	0.17
Granted		250,000	$	0.14
Expired/Canceled		-		n/a
Exercised		-		n/a
Outstanding, end of period		8,000,000	$	0.17
Exercisable		3,000,000	$	0.16

The Company estimates the fair value of each stock award by using the Black-Scholes option pricing model, which model requires the use of exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate, and the weighted average expected life of the options. Because the Company does not pay dividends, the dividend rate variable in the Black-Scholes model is zero.  Under the provisions of this accounting standard, additional expense of $22,886 and $249,115 was recorded for the nine months ended September 30, 2011 and 2010, respectively, using the Black-Scholes option pricing model.  An additional amount of $67,465 has been capitalized as patent costs as of September 30, 2010, as previously mentioned, which costs are being amortized over the expected useful life of the patents.