Accounting for Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

6. Accounting for Stock-Based Compensation

During the three month periods ended June 30, 2011 and 2010, the Company granted 26,000 and 15,000 stock options, respectively, to employees and directors.  The Company recognized $52,000 and $41,000, respectively, stock-based compensation expense for the three month periods ended June 30, 2011 and 2010.  During the six month periods ended June 30, 2011 and 2010, the Company granted 417,000 and 495,000, respectively, stock options to employees and directors.  The Company recognized $108,000 and $83,000, respectively, stock-based compensation expense for the six month periods ended June 30, 2011 and 2010.

During the three month period ended June 30, 2011 and 2010, no options were exercised under the 2005 Plan.   During the six month period ended June 30, 2011 and 2010, no options were exercised under the 2005 Plan.

Valuation Assumptions

The fair values of option awards were estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

	For Three Months Ended June 30, 2011			For Three Months Ended June 30, 2010			For Six Months Ended June 30, 2011			For Six Months Ended June 30, 2010
Weighted average grant date fair value	$	0.57		$	0.81		$	0.67		$	0.40
Weighted average assumptions used:
Expected dividend yield	0.0		%	0.0		%	0.0		%	0.0		%
Risk-free interest rate	1.8		%	2.0		%	2.21		%	2.2		%
Expected volatility	202.0		%	197.0		%	202.0		%	199.9		%
Expected life (in years)	5.0			5.0			4.9			4.9

Expected volatility is based on historical volatility and in part on implied volatility.  The expected life considers the contractual term of the option as well as historical exercise and forfeiture behavior.  The risk-free interest rate is based on the rates in effect on the grant date for U.S. Treasury instruments with maturities matching the relevant expected term of the award. Options granted to non-employees are valued using the fair market value on each measurement date of the option.