Stock-Based Compensation Arrangements

3 Months Ended

Mar. 31, 2012

Stock-Based Compensation Arrangements

Note 9—Stock-Based Compensation Arrangements

Total compensation cost that has been charged against income for stock-based compensation arrangements is as follows:

	Three Months Ended March 31,
	2012		2011
Stock option grants beginning of period	$	21,434	$	28,651
Stock-based arrangements during the period:
Stock option grants		12,506		40,419
Restricted stock issued:
Employee stock purchase plan		1,163		1,405
	$	35,103	$	70,475

Stock option and restricted stock grants

The following table details stock option and restricted stock activity for the three months ended March 31, 2012 and 2011:

	Three Months Ended March 31, 2012					Three Months Ended March 31, 2011
	Shares			Weighted Avg Exercise Price		Shares			Weighted Avg Exercise Price
Outstanding, beginning of period		2,228,067		$	1.14		1,611,267		$	1.54
Granted		—			0.00		681,000			0.33
Exercised		(2,500	)		0.00		(2,500	)		0.00
Canceled/Expired		(89,900	)		0.62		—			0.00
Outstanding, end of period		2,135,667		$	1.16		2,289,767		$	1.18
Exercisable, end of period		1,346,767		$	1.51		1,185,517		$	1.72

During the three-month period ended March 31, 2012, the Company granted no stock options under the 2004 Employee, Director & Consultant Stock Plan. At March 31, 2012, the Company had an aggregate of 2,249,713 shares of Common Stock available for grant under this plan.

It is the Company’s policy to grant stock options with an exercise price equal to the fair market value of the Company’s common stock at the grant date, and stock options to employees generally vest over four years based upon continuous service. Historically, the majority of the Company’s stock options have been granted in connection with the employee’s start date with the Company. In addition, the Company may grant stock options in recognition of promotion and/or performance.

Employee Stock Purchase Plan

Purchases made under the Company’s Employee Stock Purchase Plan are deemed to be compensatory because employees may purchase stock at a price equal to 85% of the fair market value of the Company’s common stock on either the first day or the last day of a calendar quarter, whichever is lower. The Company’s Employee Stock Purchase plan is authorized to issue 500,000 shares. On March 31, 2012, there were 5,631 shares in the plan reserved for issuance. The Company plans to present a new Employee Stock Purchase Plan for stockholder approval at its 2012 annual meeting. During the three months ended March 31, 2012 and 2011, employees purchased 5,628 and 35,135 shares, respectively, of common stock at a weighted-average purchase price of $0.16 and $0.26, respectively, while the weighted-average fair value was $0.19 and $0.30 per share, respectively, resulting in compensation expense of $1,163 and $1,405, respectively.

Restricted Stock Awards

Holders of restricted stock awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights. Recipients of restricted stock awards are generally not required to pay any consideration to the Company for these restricted stock awards. The Company measures the fair value of the shares based on the last reported price at which the Company’s common stock traded on the date of the grant and compensation cost is recognized over the remaining service period. During each of the three months ended March 31, 2012 and 2011, the Company granted no restricted stock awards.

At March 31, 2012, there was approximately $233,000 of total unrecognized compensation related to non-vested share-based compensation arrangements granted under the Company’s stock plans.