COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2012

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Operating Leases

In August 2102, we entered into two 1-year lease agreements to lease office and manufacturing space and to lease storage space in Tucson, Arizona.

In September 2012, we closed on the sale of the office, manufacturing and storage facility that we have occupied since our inception in 2002. The building represented a sizable asset which was much larger than that required to support our present operations.

In November 2009, we commenced a two year non-cancelable, renewable operating lease in Tucson, Arizona, at a monthly rent of approximately $9,000. We are also responsible for certain property related costs, including insurance, utilities and property taxes. We exited this property in November 2011.

Rent expense was approximately $23,000 and $97,000 for 2012 and 2011, respectively.

At December 31, 2012, we had approximately $27,000 in future minimum lease payments due in less than a year.

Guarantees

We agree to indemnify our officers and directors for certain events or occurrences arising as a result of the officers or directors serving in such capacity. The maximum amount of future payments that we could be required to make under these indemnification agreements is unlimited. However, we maintain a director's and officer’s liability insurance policy that limits our exposure and enables us to recover a portion of any future amounts paid. As a result, we believe the estimated fair value of these indemnification agreements is minimal because of our insurance coverage and we have not recognized any liabilities for these agreements as of December 31, 2012 and 2011.

Litigation

On or about January 14, 2010, NewOak Capital Markets LLC ("NewOak"), formerly known as J. Giordano Securities, LLC, the placement agent for our October 2005 private placement of preferred stock, filed a Statement of Claim against us with Financial Industry Regulatory Authority ("FINRA"). NewOak alleged that we made material misrepresentations between May 2005 and May 10, 2006 concerning the status of our products.

On July 13, 2011 the United States Court of Appeals, Second Circuit dismissed the arbitration.

On December 14, 2011, NewOak filed a lawsuit in the United States District Court for the Southern District of New York against the Registrant and two former officers and directors. NewOak alleges that the Registrant made material misrepresentations prior to the October 2005 private placement concerning the development of its counter-IED products.

On February 9, 2012, the litigation with NewOak was dismissed with prejudice on February 16, 2012 pursuant to a settlement agreement which required the payment of $200,000. The $200,000 payment is accrued as of December 31, 2011, net of insurance proceeds of $50,000.

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We may from time to time be involved in legal proceedings arising from the normal course of business.