Stock Options

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Stock Options

4. Stock Options

During the three-month periods ending September 30, 2011 and 2010, the Company recorded no direct stock-based compensation expense. During the nine-month periods ended September 30, 2011 and 2010, the Company recognized compensation expense of $-0- and $34,438, respectively.

For the three-month and nine-month periods ended September 30, 2011, the Company recorded stock-based compensation expense of $36,912 and $116,853, related to unvested employee stock options. For the three-month and nine-month periods ended September 30, 2010, the Company recorded stock-based compensation expense of $14,493 and $44,764, related to unvested employee stock options.

Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable in accordance with FASB ASC 505, Equity, and FASB ASC 718, Compensation – Stock Compensation. The related expense is recognized over the period the services are provided.

The Company issued 53,571 common stock purchase warrants in 2007 in connection with a share issuance at that time. Those warrants were incorrectly excluded from the total warrants outstanding in previous filings. These warrants have an exercise price of $1.25 per share of common stock and expire March 14, 2012. The exercise price of the warrants is subject to pro-rata adjustment in the event of stock splits, recapitalizations and similar corporate events. These warrants are included in the opening warrant balance in this schedule. This correction did not have any impact on the operating results of the Company.

A summary of the Company’s stock option plans as of September 30, 2011, and changes during the nine month period then ended is presented below:

	Nine Months Ended September 30, 2011
	Number of Options		Weighted Average Exercise Price
Options outstanding at December 31, 2010		2,161,583	$	.42
Options granted		827,500		.28
Options exercised		—		—
Options expired		15,000		.37
Options cancelled		40,000		.38
Options at September 30, 2011		2,934,083	$	.38
Options exercisable at September 30, 2011		1,386,828	$	.54

A summary of the Company’s stock option plans as of September 30, 2011, and changes during the three month period then ended is presented below:

	Three Months Ended September 30, 2011
	Number of Options		Weighted Average Exercise Price
Options outstanding at June 30, 2011		2,941,583	$	.38
Options granted		7,500		.18
Options expired		15,000		.37
Options cancelled		—		—
Options at September 30, 2011		2,934,083	$	.38
Options exercisable at September 30, 2011		1,386,828	$	.52

Changes in the Company’s unvested options for the nine months ended September 30, 2011 are summarized as follows:

	Nine Months Ended September 30, 2011
	Number of Options		Weighted Average Exercise Price
Non-vested options at December 31, 2010		1,240,795	$	.23
Options granted		827,500		.28
Options vested		481,040		.26
Options cancelled		40,000		.25
Non-vested options at September 30, 2011		1,547,255	$	.25

Changes in the Company’s unvested options for the three months ended September 30, 2011 are summarized as follows:

	Three Months Ended September 30, 2011
	Number of Options		Weighted Average Exercise Price
Non-vested options at June 30, 2011		1,658,042	$	.12
Options granted		7,500		—
Options vested		118,287		.40
Options cancelled		—		—
Non vested options September 30, 2011		1,547,255	$	.25

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding	Remaining Average Contractual Life (In Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$   .14 – $ 1.70	2,886,083	5.50	$	0.35	1,338,828	$	0.46
1.99 –    3.13	48,000	1.33		2.32	48,000		2.32
Totals	2,934,083	4.80	$	0.38	1,386,828	$	0.52