9. Stock Options and Warrants

12 Months Ended

Dec. 31, 2012

Stock Options And Warrants

9. Stock Options and Warrants

The Company granted stock options to certain employees under two plans. The 1996 Stock Option Plan was adopted in 1996 (“1996 Plan”) and had options granted under it through May 29, 2006. In 2006, the Board of Directors approved and the shareholders ratified the 2006 Stock Incentive Plan (“2006 Plan”).

As determined by the members of the Compensation Committee, the Company generally grants options under the 2006 Plan at the estimated fair value at the date of grant, based upon all information available to it at the time.

The Company recognizes compensation costs only for those shares expected to vest on a straight-line basis over the requisite service period of the awards. Generally such options vest over periods of six months to two years. The fair values of option awards granted in 2012 and 2011 were estimated using the Black-Sholes option pricing model under the following assumptions:

	2012			2011
Risk free interest rate		0.62% - 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	%

2006 Stock Incentive Plan

The 2006 Plan became effective May 18, 2006, and expires May 17, 2016. The 2006 Plan provides for the granting of equity awards to key employees, including officers and directors. The maximum number of shares for which equity awards may be granted under the 2006 Plan is 1,950,000. Options under the 2006 Plan expire no later than ten years from the date of grant or when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. The average vesting period for options granted to employees under the 2006 Plan in the years ended December 31, 2012 and 2011, were twelve months and nineteen months, respectively. The exercise price of each option equals the quoted market price of the Company’s stock on the date of grant.

1996 Stock Option Plan

The 1996 Plan provided for the granting of options to purchase shares of our common stock to key employees, including officers and directors. The maximum number of shares for which options could be granted under the 1996 Plan was 3,075,000. Options expire no later than ten years from the date of grant or when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. There were 360,000 and 411,000 unexpired exercisable options remaining from the 1996 Plan at December 31, 2012 and 2011, respectively.

The status of the options issued under the foregoing option plans as of December 31, 2012, and changes during the years ended December 31, 2012 and 2011, were as follows:

	Options outstanding
	Number of shares		Weighted average price per share
Balance at December 31, 2010		1,119,000	$	0.30
Options granted		45,500		0.17
Options exercised, expired or forfeited		161,500		0.20
Balance at December 31, 2011		1,003,000		0.31
Options granted		109,500		0.14
Options exercised		5,000		0.07
Options expired or forfeited		75,000		0.30
Balance at December 31, 2012		1,032,500	$	0.29

The following table summarizes information about options at December 31, 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
	1,032,500	$	0.29		4.32	$	1,770		920,250	$	0.31		3.73	$	1,770

Nonvested stock awards as of December 31, 2012 and changes during the year ended December 31, 2012, were as follows:

	Nonvested
	Number of shares		Weighted average grant date fair value
Balance at December 31, 2011		60,000	$	0.09
Granted		109,500		0.08
Vested		41,250		0.10
Expired before vesting		16,000		0.08
Balance at December 31, 2012		112,250		0.08

As of December 31, 2012 and 2011, unrecognized compensation cost associated with non-vested share based employee and non-employee compensation totaled $3,094 and $2,225, respectively, which is expected to be recognized over a weighted average period of 5 months and 7 months, respectively.

Warrants

The Board of Directors may also grant warrants to directors, employees and others. There were no warrants issued nor exercised during the years ended December 31, 2012 and 2011. As of December 31, 2012 and 2011, there were no outstanding warrants.