Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 4 – Stock-Based Compensation

A total of 1,010,105 stock options were issued to employees during the six months ended June 30, 2011, exercisable at strike prices ranging from $0.017 to $0.14 per share.

On April 7, 2011, the Board approved the 2011 Stock Incentive Plan (the “2011 Plan”) and on April 22, 2011, we filed a registration statement on Form S-8 to register the shares of our common stock, $0.001 par value, underlying the Plan.

On April 7, 2011, the Board approved and issued option agreements with two employees and a contractor for a total of 210,000 shares of our common stock from our 2003 Stock Option Plan at an exercise price of $0.017 per share. The grants to employees vest in equal annual installments over a four year period. The grant to the contractor vests over the term of the contract.

The Board also approved the cancellation of substantially, but not all, outstanding option agreements under the 2003 Stock Option Plan and 2003 Stock Incentive Plan with our directors and employees whose exercise prices were $1.00 or greater and the issuance of replacement option agreements at an exercise price of $0.017. The replacement option agreements restates the respective terms of each prior agreement giving consideration to our reverse stock split and in regard to vesting. The impact to our statement of operations from this transaction was not material.

Further, on April 7, 2011, the Board approved and issued option agreements with three members of our Board for a total of 300,000 shares of our common stock from our 2011 Stock Incentive Plan at an exercise price of $0.017 per share. Two of the three grantees’ options vest in equal monthly installments over an 18 month period, and the third grantee’s options vested on the date of the grant.

During the quarter ended June 30, 2011, we cancelled 422,503 vested and non-vested stock options held by 17 employees, directors, officers and consultants, and granted 500,105 replacement stock options to employees, directors, officers, and consultants under the 2011 Plan on April 7, 2011 at an exercise price of $0.017 per share. The replacement options were issued to most, but not all employees whose exercise prices were $1.00 or greater

The grant date fair values of the options issued during the three months ended June 30, 2011 was $8,000, which amount is being recognized over the vesting period of the options. Total stock-based compensation expense recorded in the statement of operations was $25,000 and $39,700 for the three months ended June 30, 2011 and 2010 and $52,000 and $97,500 for the six months ended June 30, 2011 and 2010, respectively.

We used the following assumptions to value the stock options granted during the six months ended June 30, 2011 and 2010:

	Six Months Ended June 30,
	2011			2010
Volatility		148-169	%		168-210	%
Expected dividends		-			-
Expected term (in years)		5.66			6.5
Risk-free rate		2.70-2.89	%		0.50	%

A summary of the transactions and status of our granted, vested and exercisable options during the six months ended June 30, 2011 with respect to our stock option plans follows:

	Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Contractual Life Remaining in Years
	(in thousands)					(in thousands)
Outstanding at December 31, 2010		702		$	1.23
Granted		1,010		$	0.03
Exercised		-		$	-
Forfeited		(423	)	$	1.72
Outstanding at June 30, 2011		1,289		$	0.30	$	13		9.0
Exercisable at June 30, 2011		742		$	0.49	$	6		8.5

A summary of the status of our non-vested options as of June 30, 2011 and changes during the six months ended is presented below:

Nonvested Shares	Shares			Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested at December 31, 2010		120		$	0.71
Granted		1,010		$	0.04
Vested		(373	)	$	0.01
Forfeited		(210	)	$	0.71
Nonvested at June 30, 2011		547		$	0.03

The following table summarizes information about our stock options outstanding at June 30, 2011:

Options Outstanding								Options Exercisable
Exercise Prices		Number of Shares		Weighted- Average Remaining Life		Weighted- Average Exercise Price		Number of Shares		Weighted- Average Exercise Price
		(in thousands)		(in years)				(in thousands)
	$0.017 to $0.39		949		9.7	$	0.04		402	$	0.03
	$1.00		331		7.2	$	1.00		331	$	1.00
	$2.00		9		7.8	$	2.00		9	$	2.00
			1,289		9.0	$	0.30		742	$	0.49

There were no stock options exercised during the six months ended June 30, 2011.