Stock-Based Compensation Arrangements

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation Arrangements

Note 10—Stock-Based Compensation Arrangements

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Stock option grants beginning of period	$	48,185	$	44,949	$	94,796	$	73,600
Stock-based arrangements during the period:
Stock option grants		3		14,092		3		54,511
Restricted stock issued:
Employee stock purchase plan		169		1,450		1,332		2,855
	$	48,357	$	60,491	$	96,131	$	130,966

Stock option and restricted stock grants

The following table details stock option and restricted stock activity for the six months ended June 30, 2012 and 2011:

	Six Months Ended June 30, 2012					Six Months Ended June 30, 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		500			0.34		781,000			0.35
Exercised		(2,500	)		0.00		(2,500	)		0.00
Canceled/Expired		(125,800	)		0.59		(172,500	)		1.18
Outstanding, end of period		2,100,267		$	1.17		2,217,267		$	1.15
Exercisable, end of period		1,393,217		$	1.50		1,086,967		$	1.75

During the six month period ended June 30, 2012, the Company granted stock options under the 2004 Employee, Director & Consultant Stock Plan. At June 30, 2012, the Company had an aggregate of 2,258,213 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. During the three months ended June 30, 2012, 5,628 shares were issued and the remaining shares were cancelled with the termination of the plan. At the Company’s 2012 annual meeting on August 7, 2012, the Company’s stockholders approved a new Employee Stock Purchase Plan, pursuant to which 750,000 shares of common stock are authorized to be issued. During the six months ended June 30, 2012 and 2011, employees purchased 52,158 and 64,134 shares, respectively, of common stock at a weighted-average purchase price of $0.17 and $0.26, respectively, while the weighted-average fair value was $0.20 and $0.31 per share, respectively, resulting in compensation expense of $1,332 and $2,855, 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 six months ended June 30, 2012 and 2011, the Company granted no restricted stock awards.

At June 30, 2012, there was approximately $217,000 of total unrecognized compensation related to non-vested share-based compensation arrangements granted under the Company’s stock plans.