STOCK OPTIONS

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Note 10 - STOCK OPTIONS

The Company adopted a stock option plan ("Plan"). The purpose of this Plan is to provide additional incentives to key employees, officers, directors and consultants of the Company and its subsidiaries in order to help attract and retain the best available personnel for positions of responsibility and otherwise promote the success of its business. It is intended that options issued under this Plan constitute non-qualified stock options. The general terms of awards under the option plan are that 100% of the options granted will vest the year following the grant. The maximum term of options granted is 5 years.

The Company may issue stock options and stock bonuses for shares of its common stock to provide incentives to directors, key employees and other persons who contribute to the success of the Company. The exercise price of all incentive options are issued for not less than fair market value at the date of grant.

The following table summarizes the Company’s stock option activity for the year ended December 31, 2011 and the three month period ended March 31, 2012:

	Number of shares			Exercise price per share		Weighted average exercise price
Balance, December 31, 2010		1,836,700		$	1.50 - 3.60	$	3.03
Granted		663,000		$	1.50 – 2.45	$	1.63
Cancelled or expired		(1,306,000	)	$	1.90 – 3.60	$	3.23
Balance, December 31, 2011		1,193,700		$	1.50 – 3.60	$	2.04
Granted		89,000		$	2.22	$	2.22
Cancelled or expired		(57,000	)	$	3.60	$	3.60
Balance, March 31, 2012		1,225,700		$	1.50 – 3.60	$	1.98
Exercisable, March 31, 2012		712,700		$	1.50 – 3.60	$	2.19

The fair value of each option grant is calculated using the following weighted average assumptions:

	2012			2011
Expected life – years		5.0			5.0
Interest rate		0.91	%		1.8	%
Volatility		60	%		62	%
Dividend yield		—	%		—	%
Weighted average fair value of options granted	$	0.90		$	0.39-0.50

During the three months ended March 31, 2012 the Company granted 28,000 options to consultants that resulted in $5,015 in expenses this quarter. During the same period, 61,000 options were granted to employees, resulting in $10,568 in expenses this quarter. Options granted in previous quarters resulted in additional expenses in the amount of $7,230 for consultants and $9,544 for employees during the quarter ended March 31, 2012. No stock options were exercised during the period.

During the three months ended March 31, 2011 the Company granted 196,000 options to consultants that resulted in $13,550 in expenses this quarter. During the same period, 162,000 options were granted to employees, resulting in $17,317 in expenses this quarter. Options granted in previous quarters resulted in additional expenses in the amount of $5,971 for employees during the quarter ended March 31, 2011. No stock options were exercised during the period.