5. STOCKHOLDERS' EQUITY OPTIONS

6 Months Ended

Jun. 30, 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 $12,290 and $0 for the quarter ended June 30, 2012 and 2011 respectively, and was included in the results of operations in the accompanying condensed consolidated financial statements.

As of June 30, 2012, there was approximately $222,649 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 June 30, 2012 is as follows:

								Weighted-
				Weighted-		Weighted-		Average
				Average		Average		Remaining
				Exercise		Intrinsic		Contractual
	Number of Shares			Price		Value		Life (years)
Outstanding at March 31, 2012		2,443,333		$	0.30	$	—		7.12
Granted		580,000		$	0.35		—
Exercised		—			—		—
Cancelled		(458,333	)		0.32		—
Outstanding at June 30, 2012		2,565,000		$	0.33	$	—
Exercisable at June 30, 2012		275,000		$	0.27	$	—
Remaining Expense to be recognized	$	110,605
Over remaining weighted average years		9.00