Accounting for Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

6. Accounting for Stock-Based Compensation

During the three month periods ended March 31, 2013 and 2012, the Company granted 263,000 and 310,000 stock options, respectively, to employees.  The Company recognized $70,000 and $68,000, respectively, stock-based compensation expense for the three month periods ended March 31, 2013 and 2012.

During the three month period ended March 31, 2013 and 2012, none and 30,000 options were exercised under the 2005 Plan, respectively.

Valuation Assumptions

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

	For Three Months Ended March 31, 2013			For Three Months Ended March 31, 2012
Weighted average grant date fair value	$	0.47		$	0.64
Weighted average assumptions used:
Expected dividend yield	0.0		%	0.0		%
Risk-free interest rate	0.8		%	0.8		%
Expected volatility	225.0		%	213.0		%
Expected life (in years)	4.9			4.9

Expected volatility is based on historical volatility and in part on implied volatility.  The expected term 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.