Stock Options

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Stock Options

11. Stock Options

On July 29, 2010, the Company's Board of Directors approved the adoption of a stock option plan (the "2010 Option Plan"), which provides for the granting of up to 2,000,000 options, subject to stockholder approval, (for both incentive and non-qualified stock options to key personnel, including officers, directors, consultants and advisors to the Company, based upon the determination of the Board of Directors.

On May 23, 2011 the Board of Directors approved and adopted an increase in the number of shares reserved for issuance under the 2010 Plan from 2,000,000 shares to 4,000,000 shares.

The Company has three stock option plans, one adopted in September 1999 and amended in June 2000 (the “1999 Option Plan”), one adopted on November 8, 2000 (the “Directors’ Plan”), and one adopted in July 2010 (the “2010 Option Plan”). The 1999 Option Plan provides for the granting of up to 3,000,000 options, the Directors’ Plan provides for the granting of up to 400,000 options, and the 2010 Option Plan provides for the granting of 2,000,000 options.

The 1996, 1999 and 2010 Plans provide for the granting of both incentive and non-qualified stock options to key personnel, including officers, directors, consultants and advisors to the Company, at the discretion of the Board of Directors. Each plan limits the exercise price of the options at no less than the quoted market price of the common stock on the date of grant. The option term is determined by the Board of the Directors or the Compensation Committee, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an Incentive Option granted to an eligible employee owning more than 10% of the Company’s common stock, no more than five years after the date of the grant. Generally, under all three plans, options to employees vest over four years at 25% per annum, except for certain grants to employees that vest 25% upon grant with remaining amounts over two years at 50% and 25% per annum, respectively.

The Directors’ Plan provides for the granting of non-qualified options to members of the Board of Directors at exercise prices not less than the quoted market price of the common stock on the date of grant and options expire five years from the date of grant. In the event a person ceases to serve on the Board of Directors, the outstanding options expire one year from the date of cessation of service. Such options may be exercised commencing two years from the date of grant.

During each of 2011 and 2010, 30,000 of options were issued to non-employee Directors.

Additional information concerning the activity in the three option plans is as follows:

	2011					2010
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding, beginning of year		2,161,583		$	.66		1,910,075		$	1.95
Granted		896,389			.27		796,508			.21
Exercised		—			—		(15,000	)		.14
Cancelled		(40,000	)		.25		(165,000	)		.47
Expired		(24,000	)		.78		(365,000	)		7.96
Outstanding, end of year		2,993,972			.37		2,161,583			.42
Exercisable, end of year		1,432,273			.51		920,788			.66
Options available for future grant, end of year		2,647,103					1,483,492

Summarized information with respect to options outstanding under the three option plans at December 31, 2011 is as follows:

	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
$0.11 – $1.70		2,949,972		5.21	$	.34		1,388,273	$	.45
$1.99 –$2.60		44,000		1.33		2.31		44,000		2.31
Totals		2,993,972		4.78	$	.37		1,432,273	$	.51

Summarized information with respect to options outstanding under the three option plans at December 31, 2011 is as follows:

	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
$0.14 – $1.70		2,113,583		5.79	$	.37		872,788	$	.57
$1.99 –$2.60		48,000		2.08		2.32		48,000		2.32
Totals		2,161,583		5.53	$	.41		920,788	$	.66