Stock Based Compensation

9 Months Ended

Sep. 30, 2011

Stock Based Compensation [Abstract]

Stock Based Compensation

3. Stock Based Compensation

Stock Options

The Company accounts for stock options using the fair value recognition provisions of Accounting Standards Codification (“ASC”) 718, “Compensation-Stock Compensation”.  Compensation expense for options for the three and nine months ended September 30, 2011 was $5,000 and $45,000 respectively.  For the three and nine month periods ended September 30, 2010 there was no compensation expense for options.  At September 30, 2011, there was $10,000 of unearned compensation costs related to stock options granted.

Nonqualified and incentive stock options have been granted to directors, officers and employees of the Company under our Stock Option Plans.  Options generally vest over 3 years and expire five years from the date of the grant.  At September 30, 2011, 2,659,477 shares were authorized for issuance under the stock option plans.  Awards that expire or are cancelled without delivery of shares generally become available for issuance under the plans.  The Company issues new shares to satisfy stock option exercises.  Options granted during the nine months ended September 30, 2011 and 2010 were 77,500 and 0, respectively (see Note 5).

During the nine months ended September 30, 2011, the Company granted 22,500 options to the current CEO with an exercise price of $1.15.  The options have a fair value of $16,000 determined using the Black-Sholes pricing model.  The key assumptions used in the model were a volatility of 102.0%, a dividend rate of 0%, a risk free rate of 0.33%, and an expected life of 2.7 years.  The Company granted 55,000 options to employees with an exercise price of $1.20.  The options have a fair value of $40,000 determined using the Black-Sholes pricing model.  The key assumptions used in the model were a volatility of 103.0%, a dividend rate of 0%, a risk free rate of 0.62%, and an expected life of 2.5 years.  No options were issued during the nine months ended September 30, 2010.

A summary of option activity under the plans for the nine months ended September 30, 2011 is as follows:

	Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate  Intrinsic Value (in thousands)
Balance, January 1, 2011		425		$	0.78
Granted		78		$	1.19
Exercised		(350	)	$	0.62
Canceled		--			--
Forfeited		( 25	)	$	1.50
Balance, September  30, 2011		128		$	1.31		3.5		--
Exercisable, September  30, 2011		113		$	1.33		3.3		--

The total fair value of options vested during the nine months ended September 30, 2011 and 2010 was $45,000 and $0, respectively.

Restricted Stock Grants

During the nine months ended September 30, 2011 the Company granted approximately 111,000 shares to directors as part of their compensation.  The stock grants had a fair value of approximately $86,000 based on the closing price of the stock on the date of the grant.  The stock grants vest over the two year period from January 1, 2011 through December 31, 2012.

See notes to condensed consolidated financial statements.

A summary of the status of the Company's restricted non-vested shares issued pursuant to employment and service agreements as of September 30, 2011 and changes during the nine months ended September 30, 2011 is presented below:

Non-Vested Shares	Shares (in thousands)			Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2011		26		$	0.95
Granted		111		$	0.78
Vested		(61	)	$	0.81
Forfeited		(29	)	$	0.62
Non-vested at September 30, 2011		47		$	0.94

For the three months ended September 30, 2011 and 2010 stock compensation expense for stock grants was $10,000 and $135,000, respectively.  For the nine months ended September 30, 2011 and 2010 stock compensation expense for stock grants was $50,000 and $404,000, respectively.  At September 30, 2011, the future expected expense for non-vested shares is $44,000 and will be recognized on a straight-line basis over the period October 1, 2011 through December 31, 2012.