COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Operating Leases

In August 2012, we entered into two 1-year lease agreements to lease office and manufacturing space and to lease storage space in Tucson, Arizona. In May 2013, these leases were changed to month-to-month.

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.

Rent expense was approximately $48,000 and $23,000 for 2013 and 2012, respectively.

At December 31, 2013, we had approximately $3,800 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, 2013 and 2012.

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 was accrued as of December 31, 2011 and paid in 2012, 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.