Stockholders' Equity

12 Months Ended

Dec. 31, 2011

Stockholders' Equity

Note 7 - Stockholders' Equity

Stock Option Plans

The Company has seven stock option plans; its 1992, 1997, 1999, 2003, 2005 and two 2006 Plans (collectively, the Plans). Pursuant to the Plans, a total of 18,850,000 shares of common stock were made available for grant of stock options. Under the Plans, options have been granted to key personnel to purchase shares at not less than fair market value on the date of grant. Stock options generally vest ratably over a period of three to five years from the date of grant and must be exercised within ten years from the date of grant. The Company’s policy is to recognize compensation expense on a straight-line basis over the requisite service period for the entire award. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. No further grants will be made under the 1992, 1997 or 1999 Plans.

Options have been granted under the Plans to independent sales agents under the same general terms and conditions as options granted to employees. Such option grants are primarily based upon profits generated and act as long-term incentives to remain with the Company. Out of the total options outstanding of 9,036,000 as of December 31, 2011, 3,594,000 have been granted to independent sales agents.

Option activity for the years ended December 31, 2011 and 2010 was as follows:

						Weighted
				Weighted		Average		Aggregate
	Shares			Average		Remaining		Intrinsic
	Subject to			Exercise Price		Contractual		Value
	Options			Per Share		Life		(in millions)
Outstanding, January 1, 2010		11,102,000		$	.72		4.1	$	-
Forfeited		(4,455,000	)		.76
Exercised		(132,000	)		.35
Granted		850,000			.54
Outstanding, December 31, 2010		7,365,000		$	.67		2.1	$	-
Forfeited / Expired		(392,000	)		.89
Exercised		(1,362,000	)		.46
Granted		3,425,000			.74
Outstanding December 31, 2011		9,036,000		$	.72		3.2	$	1.4
Exercisable, December 31, 2011		4,158,000		$	.79		1.5	$	.6

As of December 31, 2011, there were 5,820,000 shares of common stock available for issuance pursuant to future stock option grants. Additional information regarding options outstanding as of December 31, 2011 is as follows:

		Options outstanding						Options exercisable
				Weighted
				average
				remaining		Weighted				Weighted
Range of				contractual life		average exercise				average exercise
exercise prices		Shares		(years)		price		Shares		price
$	.05 - .20		208,000		1.1	$	.16		208,000	$	.16
	.24 - .65		3,106,000		3.1		.43		1,476,000		.41
	.67 - .88		3,985,000		4.5		.78		804,000		.85
	1.00 – 1.48		1,737,000		.7		1.17		1,670,000		1.17
$	.05 – 1.48		9,036,000		3.2	$	.72		4,158,000	$	.79

Weighted average grant-date fair value of options granted:

2011	$	.74
2010	$	.54

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions by grant year.

	2011			2010
Risk-free interest rate		.5	%		.5	%
Expected dividend yield		0	%		0	%
Expected volatility factor		15.10	%		15.59	%
Expected option term, in years		6.00			5.76

The Company recognized stock-based compensation expense related to stock options of $131,000 and $128,000 for the years ended December 31, 2011 and 2010, respectively. As of December 31, 2011, the Company had $115,000 of unrecognized stock-based compensation expense related to non-vested stock option plans that will be recognized over a period of five years.