NOTE 6 - COMMON STOCK OPTIONS

3 Months Ended

Mar. 31, 2013

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

NOTE 6     COMMON STOCK OPTIONS

On August 26, 2009, the Company granted options for the purchase of 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) 500,000 of the options vested immediately on the date of grant, (ii) 500,000 options vested on the date certified by the Company as the date the Company’s hospital disinfection 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 50 units or devices have been sold to third parties by the Company.  As of March 31, 2013, 500,000 of the 1,500,000 options granted to this consultant had not yet vested.

In July 2010, the Company granted options for the purchase of 3,500,000 shares of common stock (of which 250,000 were cancelled in 2011) of common stock to certain board members and employees of the Company for services rendered.  These options are exercisable for five years from the date of grant at $0.20 per share, and vested when the Company achieved commercial sales during the third quarter of 2012.  

In September 2010, the Company granted options for the purchase of 250,000 shares of common stock to a consultant in connection with extending his consulting agreement with the Company through September 2011.  These options are exercisable at $0.275 per share for five years from the date of grant and vested when the Company achieved commercialization and sales of the AsepticSure™ product during the third quarter of 2012.  

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 fair value of the common stock based on the 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 for the purchase of an aggregate 1,050,000 shares of common 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.

In May 2012, the Company granted options for the purchase of 1,000,000 shares of common stock to an individual for services.  Options for 200,000 shares have vested 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 value of these options granted was $153,997 in connection with which the Company recognized $15,399 during the three months ended March 31, 2013.

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 value of the vested options granted was $149,460 which the Company recognized $25,408 during the three months ended March 31, 2013.  As of March 31, 2013, options for the purchase of 840,000 of the 1,000,000 shares have vested.

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 the value associated with these options was recorded as part of the stock transactions.

The Company estimated the fair value of the stock options described in the above paragraphs 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 March 31, 2013, and for the three-month period then ended, is presented below:

	Shares		Weighted Average Exercise Price
Outstanding, beginning of the period		17,300,000	$	0.17
Granted		-		-
Expired/Canceled		-		-
Exercised		-		-
Outstanding, end of the period		17,300,000		0.17
Exercisable		15,840,000		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 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 option-pricing model is zero. Expense of $40,809 and $1,057,600 related to sock options was recorded for the three-month periods ended March 31, 2013 and 2012, respectively.  As of March 31, 2013, the Company had various unvested outstanding options with related unrecognized expense of $196,000.  The Company will recognize this expense as these options vest over their remaining useful lives, which range from 17 to 49 months.