12. Stock Options

In October 2000, the Company approved a Stock Incentive Plan which was effective for a ten-year period commencing on October 25, 2000 and ending on October 24, 2010. The aggregate number of shares of Common Stock as to which options and Stock Appreciation Rights may be granted to participants under the original Plan was not to exceed 7,000,000. The most recent amendment to the Plan increasing the number of shares that may be issued under the Plan by 3,500,000 shares and extending the Plan for another ten years was approved by the Company's Board of Directors on February 1, 2008 and approved by the Company's shareholders at the Annual Meeting of Stockholders held on June 2, 2008. Options are not transferable, are exercisable for 3 months after voluntary resignation from the Company, and terminate immediately upon involuntary termination from the Company. The purchase price of shares subject to this Plan shall be determined at the time the options are granted, but are not permitted to be less than 85% of the fair market value of such shares on the date of grant. Furthermore, a participant in the Plan may not, immediately prior to the grant of an Incentive Stock Option, own stock in the Company representing more than ten percent of the total voting power of all classes of stock of the Company unless the per share option price specified by the Board for the Incentive Stock Options granted such a participant is at least 110% of the fair market value of the Company's stock on the date of grant and such option, by its terms, is not exercisable after the expiration of 5 years from the date such stock option is granted.

Stock option activity in 2013, 2012, and 2011 is summarized below:


	2013				2012				2011
				Weighted				Weighted				Weighted
				Average				Average				Average
				Exercise				Exercise				Exercise
	Shares			Price	Shares			Price	Shares			Price
Outstanding,
beginning of year	1,372,250		$	0.61	1,471,000		$	0.61	1,571,000		$	0.60
Granted	75,000		$	0.54	87,500		$	0.85	186,745		$	1.01
Exercised	-		$	0.57	(105,000	)	$	0.50	(50,000	)	$	0.57
Expired/cancelled	(577,000	)	$	0.72	(81,250	)	$	1.12	(236,745	)	$	0.82
Outstanding, end of
year	870,250		$	0.59	1,372,250		$	0.61	1,471,000		$	0.61
Exercisable, end of
year	790,250		$	0.60	1,212,250		$	0.62	1,231,000		$	0.63

The following table summarizes information about stock options outstanding and exercisable at December 31, 2013:


	Weighted Average	Options Outstanding	Weighted Average	Options
	Exercise Price	(shares)	Remaining Contractual	Exercisable
			Life (years)	(shares)
$	0.70	50,000	0.1	50,000
$	0.50	400,000	1.8	320,000
$	0.43	50,000	1.1	50,000
$	0.44	114,000	1.7	114,000
$	1.08	50,000	2.3	50,000
$	1.16	18,750	2.3	18,750
$	0.84	18,750	2.5	18,750
$	0.72	18,750	2.8	18,750
$	0.75	18,750	3.0	18,750
$	1.07	18,750	3.2	18,750
$	0.81	18,750	3.5	18,750
$	0.73	18,750	3.8	18,750
$	0.64	18,750	4.0	18,750
$	0.62	18,750	4.2	18,750
$	0.48	18,750	4.5	18,750
$	0.41	18,750	4.8	18,750

		870,250		790,250

During 2013, the Company issued the following options to each of the non-executive directors that remain outstanding as of December 31, 2013. These options vested upon grant date.


Options Issued to	Total Options Issued to
Each Non-executive	Non-executive Directors		Exercise Price	Grant Date	Expiration Date
Director
6,250	18,750	$	0.64	1/2/2013	1/1/2018
6,250	18,750	$	0.62	4/1/2013	3/31/2018
6,250	18,750	$	0.48	7/1/2013	6/30/2018
6,250	18,750	$	0.41	10/2/2013	10/1/2018

The weighted average fair value per share of options granted in 2013 was $0.25 and 2012 was $0.47 calculated using the Black Scholes option pricing model.

Compensation expense related to stock options was $(28,000) in 2013 and was $51,000 in 2012 and $165,000 in 2011. The 2013 amount was comprised of $32,000 of current year compensation expense offset by reversal of $59,500 previously recognized as compensation expense. This expense is recorded in "General and administrative" in the Consolidated Statements of Operations. At December 31, 2013, there was approximately $9,000 of total unrecognized compensation costs related to unvested options that is expected to be recognized over a weighted average period of approximately 0.5 years. The fair value of stock options used to compute share based compensation is the estimated present value at grant date using the Black Scholes option pricing model with weighted average assumptions for 2013 of expected volatility of 47.6%, a risk free interest rate of 2.97% and an expected option life remaining from 0.1 to 4.8 years. The weighted average assumptions for 2012 were expected volatility of 65.0%, a risk free interest rate of 2.71% and an expected option life remaining from 0.1 to 4.8 years. The weighted average assumptions used for 2011 were expected volatility of 59.3%, a risk fee interest rate of 3.64% and an expected option life remaining for 1.1 years to 4.8 years.

On January 3, 2014, options to purchase 25,000 common shares at $0.41 per share were issued to the Company's non-executive directors. These options fully vested upon grant date and will expire on January 2, 2019.