STOCK OPTION PLAN

6 Months Ended

Jun. 30, 2011

STOCK OPTION PLAN

Under the Company’s Amended and Restated 1997 Stock Option Plan (“Option Plan”), stock option grants are available for officers, directors, and key employees. The objectives of the Option Plan are to promote the interest of the Company by providing an ownership incentive to officers, directors, and key employees, to reward outstanding performance, and to encourage continued employment. The Board of Directors, which acts as the Plan Administrator, determines to whom options are granted, the type of options, the number of shares covered by such options and the option vesting schedule. The Option Plan provides for the grant of stock options to purchase an aggregate of up to 1,500,000 shares of the Company’s Common Stock. All options are issued at market value on the date of the grant and generally have a ten-year contractual term with graded vesting.

The fair value of each option is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are based on a number of factors, including historical volatility of the Company’s stock. The Company uses the “shortcut” method described in SAB Topic 14D.2 for determining the expected life used in the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. As the Company has not declared dividends since it became a public entity, no dividend yield is used in the calculation.

At June 30, 2011, there were no unvested option grants; thus no further stock option expense will be recorded until such time that additional grants are made. The weighted-average remaining contractual term, as of June 30, 2011, was 5.3 years for outstanding and exercisable options. The following table summarizes option activity for the three months ended June 30, 2011:

	Number of Options		Weighted Average Price
Balance as of December 31, 2010		370,000	$	.21
Expired or canceled		—		—
Exercised		—		—
Granted		—		—
Balance as of June 30, 2011		370,000	$	.21