NOTE 6 COMMON STOCK WARRANTS AND OPTIONS

3 Months Ended

Mar. 31, 2012

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 the year ended December 31, 2009, thus there are no warrants outstanding as of March 31, 2012.

Options

On August 26, 2009, the Company granted a total of 1,500,000 options to an outside consultant for services rendered, with an exercise price of $0.10 per share, exercisable for up to five years, but including vesting provisions as follows: (i) 500,000 of the options vested immediately on the date of grant, (ii) 500,000 options will vest on the date certified by the Company as the date the Company’s hospital sterilization program completes its beta-testing, and (iii) the remaining 500,000 options will vest on the date certified by the Company as the date that the Company’s process has been commercialized and a minimum of fifty units or devices have been sold to third parties by the Company.  As of March 31, 2012, 1,000,000 of the 1,500,000 options granted to this consultant had not yet vested.

In July 2010, the Company granted a total of 3,500,000 options to certain board members and employees of the Company as additional compensation for work performed.  As of December 31, 2011, 250,000 options were cancelled under this agreement.  These options are exercisable at $0.20 per share, are exercisable for five years, but do not vest until the Company has achieved commercial sales.  As of March 31, 2012, none of these options had vested.  The value of these options granted, totaling $710,577, will be recorded in the future once the Company has achieved commercial sales.

In September 2010, the Company granted 250,000 options to an outside consultant in connection with extending his consulting agreement with the Company through September 2011.  These options are exercisable at $0.275 per share, are exercisable for five years, but do not vest until the Company has achieved commercialization and sales of the AsepticSure™ product.  As of March 31, 2012, none of these options had vested.  The value of these options granted, totaling $65,067, will be recorded in the future once the Company has achieved the required commercial sales.

In February 2012, the Board of Directors approved the 2012 Equity Incentive Award Plan and authorized up to 10,000,000 shares of common stock to be available for awards under the Plan.  On February 21, 2012, each of four directors of the Company was awarded stock options for the purchase of 1,000,000 shares of common stock, exercisable at a price of $0.23 per share, which was the closing price of the Company’s common stock reported on the OTC Bulletin Board on the date of grant.  In addition, certain officers, consultants and employees of the Company were awarded options in the aggregate for the purchase of 1,050,000 shares of stock at an exercise price of $0.23 per share.  The value of these options granted, totaling $1,057,600, was recognized as expense during the three months ended March 31, 2012 as each of the options granted was fully vested on the date of grant.

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	0.16%
Expected life	5 years
Expected volatility	151.73%
Dividend yield	0.00%

A summary of the status of the Company’s outstanding options as of March 31, 2012, and changes during the three month period then ended is presented below:

	Shares		Weighted Average Exercise Price
Outstanding, beginning of period		7,750,000		0.17
Granted		5,050,000		0.23
Expired/Canceled		-		-
Exercised		-		-
Outstanding, end of period		12,800,000		0.21
Exercisable		8,300,000		0.20

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 $1,057,600 and $1,733 was recorded for the three-month period ended March 31, 2012 and 2011, respectively, using the Black-Scholes option pricing model.