NOTE 7 - COMMON STOCK OPTIONS

12 Months Ended

Dec. 31, 2012

Shareholders' Equity and Share-based Payments [Text Block]

NOTE 7 - COMMON STOCK OPTIONS

On August 26, 2009, the Company granted options for the purchase of a total of 1,000,000 shares of common stock to a Company director with an exercise price of $0.10 per share, exercisable for up to five years.  On the same date, the Company granted options for the purchase of an additional 1,500,000 shares of common stock 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) options for purchase of 500,000 shares vested immediately on the date of grant, ii) options for 500,000 shares will vest on the date certified by the Company as the date the Company’s hospital disinfection program completes its beta-testing (completed in 2012), and iii) the remaining 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 50 units or devices have been sold to third parties by the Company.  During the year ended December 31, 2012, 500,000 options vested for which the Company recognized $48,699 of expense. As of December 31, 2012, options for the purchase of 500,000 of the 1,500,000 shares had not yet vested.  

In July 2010, the Company granted options for the purchase of up to 3,500,000 shares (of which 250,000 were cancelled in 2011) of common stock to certain board members and employees of the Company as additional compensation for work performed.  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 (completed in 2012).  During the year ended December 31, 2012, these 3,250,000 options vested for which the Company recognized $659,822 of expense.

In September 2010, the Company granted options for the purchase of up to 250,000 shares of common stock 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.  During the year ended December 31, 2012, these options vested for which the Company recognized $65,067 of expense.

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.  The options have an exercise price of $0.14 per share, and are exercisable for up to five years.  The Company recognized $20,042 of expense during the year ended December 31, 2011 for these options.

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. The options have an exercise price of $0.14 per share, and are exercisable for up to five years.  The Company recognized $13,361 of expense, during the year ended December 31, 2011 for these options.

In February 2012, the Board of Directors approved the 2012 Equity Incentive Award Plan (the “2012 Plan”) and authorized up to 10,000,000 shares of common stock to be available for awards under the 2012 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 over-the-counter Bulletin Board on the date of grant. In addition, certain officers, consultants and employees of the Company were awarded in the aggregate 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 year ended December 31, 2012 as each of the options granted was fully vested on the date of grant.

In May 2012, the Company granted options for the purchase of 1,000,000 shares of common stock to an individual for distribution channel related services to be performed.  Options for 100,000 shares have vested as of December 31, 2012 and the remaining options will vest on the date certified by the Company as the date that the other milestones are achieved.  The options have an exercise price of $0.17 per share, and are exercisable for up to five years.  The grant date fair value of these options was $153,997 in connection with which the Company recognized $15,399 for the year ended December 31, 2012.  The Company will recognize the remaining expense upon achievement of the required milestones.

In May 2012, the Company granted options for the purchase of 1,000,000 shares of common stock to an individual for medical consulting support services already performed (vested immediately on the grant date) and to be performed in the future, which do not vest until completion of certain milestones. The options have an exercise price of $0.17 per share, and are exercisable for up to five years. The grant date fair value of these options was $149,460.  During 2012, options for the purchase of 670,000 of the 1,000,000 shares had vested and the Company recognized expense of $100,138 during the year ended December 31, 2012.  The Company will recognize the remaining expense upon achievement of the required milestones.

In August 2012, the Company granted options for the purchase of 2,500,000 shares of common stock to three individuals in connection with the purchase of restricted stock, exercisable at a price of $0.05 per share.  No expense was recorded for these options as any value associated with these options was recorded as part of the stock transactions.

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			2.46	%
Expected life			5 years
Expected volatility	185.59%	to	196.94	%
Dividend yield			0.00	%

A summary of the status of the Company’s outstanding options as of December 31, 2012 and changes during the year then ended is presented below:

	Shares		Weighted Average Exercise Price
Outstanding, January 1, 2012		7,750,000	$	0.17
Granted		9,550,000		0.17
Expired/Canceled		-		-
Exercised		-		-
Outstanding, December 31, 2012		17,300,000		0.19
Exercisable		15,570,000		0.17

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 expected 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.  Expense of $1,946,725 and $33,403 was recorded for the years ended December 31, 2012 and 2011, respectively, using the Black-Scholes option-pricing model.  As of December 31, 2012, the Company had various outstanding options which have not vested totaling approximately $237,000.  The Company will recognize such expense if such individual options vest over their remaining useful lives which range from 20 to 52 months