5. STOCKHOLDERS' EQUITY OPTIONS

3 Months Ended

Mar. 31, 2012

Stockholders' Equity Note Disclosure [Text Block]

5.   STOCKHOLDERS’ EQUITY OPTIONS

In 2009, the Company approved the 2009 Employee, Director and Consultant Stock Option Plan (the Plan) and authorized an option pool of 5,500,000 shares. Stock options typically vest over a 3 year period and have a life of 10 years from the date granted. In 2009, the Company accelerated the option vesting of certain employees who terminated their employment, but agreed to work in a consulting capacity. In exchange for the accelerated vesting, the employees agreed to shorter expiration periods for their options. In 2011, the Company issued options to employees of the company to purchase shares of the Company’s common stock at exercise prices of $0.30 and $0.25 per share.

Upon exercise of options by any Employee, Director or Consultant, the Company will retire the options and issue common shares commensurate with the plan. That transaction will record any cash received, the termination of options, and the issuance of common shares and related paid-in capital. The Company will not recognize any income or expense upon option conversion.

The Company’s policy was to record stock compensation expense in accordance with ASC Topic 718, “Compensation – Stock Compensation”, and ASC Topic 505-50, “Equity-Based Payments to Non-Employees”. Options granted during 2011 were valued at the date of grant using the Black-Scholes-Merton option pricing model. The per share weighted average fair value of stock options granted during 2011 was $.13 and was determined using the following assumptions: expected price volatility 57%, risk-free interest rate ranging from 1.4% to 2.9%, zero expected dividend yield, and six years expected life of options. The expected term of options granted is based on the simplified method in accordance with SAB 107, and represents the period of time that options granted are expected to be outstanding.

Options granted during 2012 were valued at the date of grant using the Black-Scholes-Merton option pricing model. The per share weighted average fair value of stock options granted during 2012 was $.19 and was determined using the following assumptions: expected price volatility 57%, risk-free interest rate ranging from 1.4% to 2.9%, zero expected dividend yield, and six years expected life of options. The expected term of options granted is based on the simplified method in accordance with SAB 107, and represents the period of time that options granted are expected to be outstanding.

The Company’s stock compensation expense for all stock options was $5,669 and $0 for the three months ended March 31, 2012 and 2011, respectively, and was included in the results of operations in the accompanying condensed consolidated financial statements.

As of March 31, 2012, there was approximately $136,018 of total unrecognized stock compensation expense related to unvested stock options under the Plan. This expense is expected to be recognized over the remaining vesting periods of the outstanding options.

A summary of options issued, exercised and expired for the three months ended March 31, 2012 is as follows:

	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Intrinsic Value		Weighted- Average Remaining Contractual Life (years)
Outstanding at December 31, 2011		1,753,333	$	0.31	$	0.17		7.29
Granted		550,000		0.35		—
Exercised		—		—		—
Cancelled		140,000		0.25		—
Outstanding at March 31, 2012		2,443,333	$	0.30	$	—
Exercisable at March 31, 2012		716,671	$	0.33	$	—
Remaining Expense to be recognized	$	110,605
Over remaining weighted average years		9.00