Accounting for Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

6. Accounting for Stock-Based Compensation

During the three month periods ended September 30, 2011 and 2010, the Company granted 6,000 and 0 stock options, respectively, to employees and directors.  The Company recognized $60,000 and $47,000, respectively, in stock-based compensation expense for the three month periods ended September 30, 2011 and 2010.  During the nine month periods ended September 30, 2011 and 2010, the Company granted 423,000 and 495,000, respectively, stock options to employees and directors.  The Company recognized $168,000 and $130,000, respectively, stock-based compensation expense for the nine month period ended September 30, 2011 and 2010.

During the three month period ended September 30, 2011 and 2010, 60,000 and 4,000 options were exercised under the 2005 Plan, respectively.   During the nine month periods ended September 30, 2011 and 2010, 60,000 and 4,000 options were exercised under the 2005 Plan, respectively.

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 September 30, 2011			For Three Months Ended September 30, 2010	For Nine Months Ended September 30, 2011			For Nine Months Ended September 30, 2010
Weighted average grant date fair value	$	0.39		—	$	0.67		$	0.40
Weighted average assumptions used:
Expected dividend yield	0.0		%	—	0.0		%	0.0		%
Risk-free interest rate	1.1		%	—	2.1		%	2.2		%
Expected volatility	207.0		%	—	202.0		%	200.0		%
Expected life (in years)	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.