A summary of option activity for employees under the plans as of September 30, 2011, and changes during the nine months ended, is presented below:


					Weighted
			Weighted		Average		Aggregate
	Number		Averaged		Remaining		Intrinsic
	of		Exercise		Contractual		Options
	Options		Price		Life (Years)		Value

Outstanding, January 1, 2011		928,504	$	1.07		3.92	$	—
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited or expired		58,000		1.15		—		—
Outstanding, September 30, 2011		870,504		1.07		3.40		35,100
Exercisable, September 30, 2011		455,708		0.95		2.35		34,865

Milestone recognizes compensation expense on a straight line basis over the requisite service period. During the nine months ended September 30, 2011, Milestone recognized $152,692 of total compensation cost. As of September 30, 2011, there was $133,950 of total unrecognized compensation cost related to non-vested options which Milestone expects to recognize over a weighted average period of 1.54 years. A six percent rate of forfeitures is assumed in the calculation of the compensation cost for the period.

Expected volatilities are based on historical volatility of Milestone’s common stock over a period commensurate with anticipated term. Milestone uses historical data to estimate option exercise and employee termination within the valuation model.

A summary of option activity for non-employees under the plans as of September 30, 2011, and changes during the nine months ended, is presented below:


					Weighted
			Weighted		Average		Aggregate
	Number		Averaged		Remaining		Intrinsic
	of		Exercise		Contractual		Options
	Options		Price		Life (Years)		Value

Outstanding, January 1, 2011		534,999		1.85		1.51		—
Granted		100,000		0.24		2.75		—
Exercised		100,000		0.25		—		—
Forfeited or expired		120,000		1.75		—		—
Outstanding, September 30, 2011		414,999		1.87		1.68		55,150
Exercisable, September 30, 2011		399,443		1.90		1.61		55,150

During the nine months ended September 30, 2011, Milestone recognized $42,581 of expenses related to non-employee options that vested during the period. The total unrecognized compensation cost related to non-vested options was $3,870 as of September 30, 2011.

In accordance with the provisions of FASB ASC 505-50-15, all other issuances of common stock, stock options or other equity instruments to non-employees as consideration for goods or services received by Milestone are accounted for based on the fair value of the equity instruments issued (unless the fair value of the consideration received can be more reliably measured). The fair value of any options or similar equity instruments issued is estimated based on the Black-Scholes option-pricing model, and the assumption that all of the options or other equity instruments will ultimately vest. Such fair value is measured as of an appropriate date pursuant to the guidance, (generally, the earlier of the date the other party becomes committed to provide goods or services or the date of performance by the other party is complete) and capitalized or expensed as if Milestone had paid cash for the goods or services.

The Company held its Annual Meeting of the Stockholders on June 16, 2011. There was an approval of the Company’s 2011 Stock Option Plan for the issuance of up to 2,000,000 common shares.