3. Stock Options

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

3. Stock Options

There were 42,500 option awards granted to employees and no option awards granted to non-employees in the three months ended June 30, 2012 and there were 35,500 option awards granted to employees and no option awards granted to non-employees in the three months ended June 30, 2011.  There were 102,500 option awards granted to employees and 5,000 option awards granted to non-employees in the six months ended June 30, 2012 and there were 10,000 option awards granted to employees and no option awards granted to non-employees in the six months ended June 30, 2011.  The fair values of option awards granted in the six months ended June 30, 2012 and 2011, were estimated using a Black-Scholes option pricing model using the following assumptions:

	Three Months ended June 30,				Six Months ended June 30,
	2012		2011		2012		2011
Risk free interest rate	0.75 – 1.10	%	1.65 – 1.72	%	0.75 – 2.31	%	1.65 - 2.30	%
Dividend yield	0	%	0	%	0	%	0	%
Expected term	5 years		5 years		5-10 years		5 years
Expected volatility	62.8	%	61.7	%	62.8 - 67.9	%	61.7 – 61.9	%

 The status of the options issued as of June 30, 2012, and changes during the six months ended June 30, 2012 and 2011, were as follows:

	Options outstanding
	Number of shares		Weighted average price per share
Balance at December 31, 2011		1,003,000	$	0.31
Options granted		65,000		0.15
Options exercised, expired or forfeited		28,000		0.36
Balance at March 31, 2012		1,040,000	$	0.30
Options granted		42,500		0.15
Options exercised		5,000		0.07
Options expired or forfeited		20,000		0.20
Balance at June 30, 2012		1,057,500	$	0.29

	Options outstanding
	Number of shares		Weighted average price per share
Balance at December 31, 2010		1,119,000	$	0.30
Options granted		10,000		0.16
Options exercised, expired or forfeited		4,500		0.27
Balance at March 31, 2011		1,124,500	$	0.30
Options granted		35,500		0.17
Options exercised, expired or forfeited		--		--
Balance at June 30, 2011		1,160,000	$	0.29

The following table summarizes information about options at June 30, 2012:

Options outstanding								Options exercisable
Total shares		Weighted average exercise price		Weighted average remaining contractual life in years		Aggregate intrinsic value		Total shares		Weighted average exercise price		Weighted average remaining contractual life in years		Aggregate intrinsic value
	1,057,500	$	0.29		4.69	$	1,770		947,250	$	0.31		4.12	$	1,770

Nonvested stock awards as of June 30, 2012 and changes during the six months ended June 30, 2012, were as follows:

	Nonvested
	Number of shares		Weighted average grant date fair value
Balance at December 31, 2011		60,000	$	0.09
Granted		65,000		0.08
Vested		18,500		0.11
Expired before vesting		6,000		0.09
Balance at March 31, 2012		100,500	$	0.08
Granted		42,500		0.08
Vested		22,750		0.09
Expired before vesting		10,000		0.08
Balance at June 30, 2012		110,250	$	0.08

As of June 30, 2012 and 2011, unrecognized compensation cost associated with non-vested share-based employee and non-employee compensation totaled $6,598 and $4,085, respectively, which are expected to be recognized over weighted average periods of 7 months and 9 months, respectively.