3. Stock Options

9 Months Ended

Sep. 30, 2012

Stock Options

3. Stock Options

There were no option awards granted to employees and no option awards granted to non-employees in the three months ended September 30, 2012 and 2011.  There were 102,500option awards granted to employees and 5,000 option awards granted to non-employees in the nine months ended September 30, 2012 and there were 45,500 option awards granted to employees and no option awards granted to non-employees in the nine months ended September 30, 2011.  The fair values of option awards granted in the nine months ended September 30, 2012and 2011, were estimated using a Black-Scholes option pricing model usingthe following assumptions:

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

The status of the options issued as of September 30, 2012, and changes during the nine months ended September 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 exercised, expired or forfeited		27,000		0.30
Balance at September 30, 2012		1,030,500	$	0.29

	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
Balance at June 30, 2011		1,160,000	$	0.29
Options exercised, expired or forfeited		157,000		0.20
Balance at September 30, 2011		1,003,000	$	0.31

The following table summarizes information about options at September 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
	1,030,500	$	0.29		4.56	$	1,770		920,250	$	0.31		3.98	$	1,770

Nonvested stock awards as of September 30, 2012 and changes during the nine months ended September 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
Balance at September 30, 2012		110,250	$	0.08

As of September 30, 2012 and 2011, unrecognized compensation cost associated with non-vested share-based employee and non-employee compensation totaled $4,765 and $3,157, respectively, which are expected to be recognized over weighted average periods of 6 months and 8 months, respectively.