Quarterly report pursuant to Section 13 or 15(d)

NOTE I - STOCK OPTIONS AND WARRANTS

 v2.3.0.11
NOTE I - STOCK OPTIONS AND WARRANTS
6 Months Ended
Jun. 30, 2011
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]
NOTE I - STOCK OPTIONS AND WARRANTS

Employee Stock Options

The Company maintains two stock option plans. The first plan 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.

Options Outstanding
   
Options Exercisable
 
Exercise Prices
   
Number
Outstanding
   
Weighted
Average
Remaining
Contractual
Life
 (Years)
   
Weighted
Average
Exercise
Price
   
Number
Exercisable
   
Weighted
Average
Exercise
Price
 
$
1.00 - $1.99
     
1,783,800
     
2.17
   
$
1.04
     
1,600,858
   
$
1.04
 
$
2.00 - $2.99
     
145,000
     
3.82
   
$
2.47
     
126,665
   
$
2.46
 
$
3.00 - $3.99
     
40,000
     
4.71
   
$
3.09
     
40,000
   
$
3.09
 
$
4.00 - $4.99
     
35,000
     
4.24
   
$
4.27
     
35,000
   
$
4.27
 
$
5.00 - $5.99
     
30,000
     
3.89
   
$
5.43
     
30,000
   
$
5.43
 
         
2,033,800
     
2.40
   
$
1.31
     
1,832,523
   
$
1.31
 

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

   
Number of
Shares
   
Weighted
Average
Price
Per Share
 
Outstanding at January 1, 2010
   
6,120,883
   
$
1.56
 
Granted
   
-
     
-
 
Exercised
   
-
     
-
 
Cancelled or expired
   
(3,572,083
)
   
1.62
 
Outstanding at December 31, 2010
   
2,548,800
   
$
1.57
 
Granted
   
-
     
-
 
Exercised
   
-
     
-
 
Cancelled or expired
   
(515,000
)
   
2.69
 
Outstanding at June 30, 2011
   
2,033,800
   
$
1.31
 

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-Merton 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-Merton 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 six months ended June 30, 2011 and 2010.  

Total stock-based compensation expense in connection with options granted to employees recognized in the condensed consolidated statement of operations for the three and six months ended June 30, 2011 and 2010 was $7,994 and $41,401, and $15,988 and $88,181, 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 Prices
   
Number
Outstanding
   
Weighted
Average
Remaining
Contractual
Life (Years)
   
Weighted
Average
Exercise Price
   
Number
Exercisable
   
Weighted
Average
Exercise Price
 
$
1.00
     
425,000
     
.62
   
$
1.00
     
425,000
   
$
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, 2010
   
675,000
   
$
1.00
 
Granted
   
-
     
-
 
Exercised
   
-
     
-
 
Canceled or expired
   
(250,000
   
1.00
 
Outstanding at December 31, 2010
   
425,000
   
$
1.00
 
Granted
   
-
     
-
 
Exercised
   
-
     
-
 
Canceled or expired
           
-
 
Outstanding at June 30, 2011
   
425,000
   
$
1.00
 

There were no non-employee stock options vested during the periods ended June 30, 2011 and 2010.

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 placement of convertible debentures.

     
Warrants Outstanding
         
Warrants Exercisable
 
Exercise Prices
   
Number
Outstanding
   
Weighted Average
Remaining Contractual
Life (Years)
   
Weighed
Average
Exercise Price
   
Number
Exercisable
   
Weighted
Average
Exercise Price
 
$
0.13
     
10,346,168
     
4.46
   
$
0.13
     
10,346,168
   
$
0.13
 
$
0.33
     
1,705,539
     
3.26
   
$
0.33
     
1,705,539
   
$
0.33
 
$
0.60
     
800,000
     
1.85
   
$
0.60
     
800,000
   
$
0.60
 
$
1.00
     
500,000
     
.53
   
$
1.00
     
500,000
   
$
1.00
 
$
2.59
     
431,226
     
.12
   
$
2.59
     
431,226
   
$
2.59
 
$
3.05
     
1,135,140
     
2.52
   
$
3.05
     
1,135,140
   
$
3.05
 
$
4.17
     
359,712
     
1.06
   
$
4.17
     
359,712
   
$
4.17
 
         
15,277,785
     
3.72
   
$
.59
     
15,277,785
   
$
.59
 

Transactions involving warrants are summarized as follows:

   
Number of
Shares
   
Weighted
Average Price
Per Share
 
Outstanding at January 1, 2010
   
12,158,941
   
$
1.60
 
Issued
   
12,819,897
     
0.28
 
Exercised
   
-
     
           -
 
Canceled or expired
   
(2,874,096
   
3.29
 
Outstanding at December 31, 2010
   
 22,104,742
   
$
.51
 
Issued
   
      5,322,847
     
         .13
 
Exercised
   
-
     
-
 
Canceled or expired
   
(12,149,804
)    
 .23
 
Outstanding at June 30, 2011
   
15,277,785
   
$
         .59
 

On April 8, 2011, the Company issued 271 shares of Series B Preferred Stock (“Series B”) with attached warrants to purchase 5,211,538 shares of the Company’s common stock at $0.13 per share.  

The Company did not issue any warrants during the period ended June 30, 2010.