Quarterly report pursuant to Section 13 or 15(d)

NOTE J - STOCK OPTIONS AND WARRANTS

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NOTE J - STOCK OPTIONS AND WARRANTS
3 Months Ended
Mar. 31, 2012
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

NOTE J – STOCK OPTIONS AND WARRANTS


Employee Stock Options


The Company maintains two stock option plans. The first plan was initiated in the year 2000 and was established as a long term incentive plan for employees and consultants, including board of director members. The second plan was established in 2010 also as an incentive plan for officers, employees, non employee directors, prospective employees and other key persons. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a better alignment of their interests with those of the Company and its stockholders.


The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees of the Company under a non-qualified employee stock option plan. No new grants may be made under the 2000 stock option plan, which expired April 23, 2012.


Options Outstanding     Options Exercisable  
Exercise Prices    

Number

Outstanding

   

Weighted Average

Remaining

Contractual Life

 (Years)

   

Weighted Average

Exercise Price

   

Number

Exercisable

   

Weighted Average

Exercise Price

 
$ 0.01 - $0.99       175,000       5.57     $ 0.14       158,954     $ .14  
$ 1.00 - 1.99       225,000       1.29       1.00       225,000       1.00  
$ 2.00 - 2.99       70,000       2.52       2.65       60,000       2.64  
$ 3.00 - 3.99       40,000       3.95       3.09       40,000       3.09  
$ 4.00 - 4.99       35,000       3.49       4.27       35,000       4.27  
$ 5.00 - 5.99       20,000       3.33       5.60       20,000       5.60  
          565,000       3.17     $ 1.45       538,954     $ 1.47  

Transactions involving stock options issued to employees are summarized as follows:


    Number of
Shares
  Weighted Average
Price Per Share
Outstanding at January 1, 2011     2,548,800     $ 1.57  
Granted     —         —    
Exercised     —         —    
Cancelled or expired     (1,863,800 )     1.10  
Outstanding at December 31, 2011     685,000     $ 1.45  
Granted     —         —    
Exercised     —         —    
Cancelled or expired     (120,000 )     1.43  
Outstanding at March 31, 2012     565,000     $ 1.45  

The expected life of awards granted represents the period of time that they are expected to be outstanding.  We determine the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules, exercise patterns and pre-vesting and post-vesting forfeitures.  We estimate the volatility of our common stock based on the calculated historical volatility of our own common stock using the trailing 24 months of share price data prior to the date of the award.  We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.  We have not paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future.  Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model. We use historical data to estimate pre-vesting option forfeitures and record share-based compensation for those awards that are expected to vest. In accordance with ASC 718-10, we adjust share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience.


There were no options granted or exercised during the three months ended March 31, 2012 and 2011.  Total stock-based compensation expense in connection with options granted to employees recognized in the condensed consolidated statements of operations for the three months ended March 31, 2012 and 2011 was $6,165 and $7,994, respectively.


Non-Employee Stock Options


The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to the Company consultants.  These options were granted in lieu of cash compensation for services performed.


Options Outstanding     Options Exercisable  
Exercise Price    

Number

Outstanding

   

Weighted Average

Remaining

Contractual Life

(Years)

   

Weighted Average

Exercise Price

   

Number

Exercisable

 

Weighted Average

Exercise Price

 
$ 1.00       25,000       .01     $ 1.00     25,000   $ 1.00  
                                         

Transactions involving options issued to non-employees are summarized as follows:


    Number of
Shares
  Weighted
Average Price
Per Share
Outstanding at January 1, 2011     425,000     $ 1.00  
Granted     —         —    
Exercised     —         —    
Canceled or expired     —         —    
Outstanding at December 31, 2011     425,000     $ 1.00  
Granted     —         —    
Exercised     —         —    
Canceled or expired     (400,000 )     1.00  
Outstanding at March 31, 2012     25,000     $ 1.00  

There were no non-employee stock options vested during the three month periods ended March 31, 2012 and 2011.


Warrants


The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company.  These warrants were granted in lieu of cash compensation for services performed or financing expenses and in connection with the issuance of Series A and B redeemable preferred stock.


      Warrants Outstanding           Warrants Exercisable  
Exercise Prices    

Number

Outstanding

   

Weighted Average

Remaining

Contractual Life

(Years)

   

Weighted Average

Exercise Price

   

Number

Exercisable

   

Weighted Average

Exercise Price

 
$ 0.13       10,346,168       3.71     $ 0.13       10,346,168     $ 0.13  
  0.33       1,628,800       2.64       0.33       1,628,800       0.33  
  0.60       800,000       1.10       0.60       800,000       0.60  
  3.01       962,330       2.25       3.01       962,330       3.01  
  4.17       359,712       .31       4.17       359,712       4.17  
          14,097,010       3.25     $ .48       14,097,010     $ .48  

Transactions involving warrants are summarized as follows:


    Number of
Shares
  Weighted Average
Price Per Share
Outstanding at January 1, 2011     22,104,742     $ 0.51  
Issued     5,336,816       0.20  
Exercised     —         —    
Canceled or expired     (12,729,694 )     0.34  
Outstanding at December 31, 2011     14,711,864       0.50  
Issued     —         —    
Exercised     —         —    
Canceled or expired     (614,854 )     1.04  
Outstanding at March 31, 2012     14,097,010     $ .48  

The Company did not issue any warrants during the three month period ended March 31, 2012.