Stock Option Plans

9 Months Ended

Sep. 30, 2011

Stock Option Plans

Note 4. Stock Option Plans

The Company has approved stock options plans covering up to an aggregate of 8,608,833 shares of common stock.  Such options may be designated at the time of grant as either incentive stock options or nonqualified stock options.  Stock based compensation includes expense charges related to all stock-based awards to employees, directors and consultants.  Such awards include options, warrants and stock grants.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.  The following assumptions were used for the nine months ended September 30, 2011 and 2010.

	2011	2010
Risk-free interest rate	1.26% - 2.46%	1.73% - 2.93%
Expected dividend yield	0%	0%
Expected stock price volatility	75%	75%
Expected life of options	5.75 years	5.75 years

The Company recorded expense for options issued to employees and independent service providers of $42,831 and $19,598 for the three months ended September 30, 2011 and 2010, respectively, and $80,844 and $78,514 for the nine months ended September 30, 2011 and 2010, respectively.

A summary of all stock option activity for the nine months ended September 30, 2011 follows:

	Number of Options			Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2010		6,414,500		$	.22
Options granted		1,701,500		$	.09
Options expired		(1,153,167	)	$	.16
Options forfeited		(58,333	)	$	.16
Outstanding at September 30, 2011		6,904,500		$	.20	6.7 years	$	138,330
Exercisable at September 30, 2011		4,731,500		$	.23	5.5 years	$	90,248

The weighted average fair value of options granted during the nine months ended September 30, 2011 was approximately $.06 ($.09 during the nine months ended September 30, 2010).  No options were exercised during the nine months ended September 30, 2011 and 2010.

At September 30, 2011, there was approximately $135,400 of unrecognized compensation cost related to non-vested options.  This cost is expected to be recognized over a weighted average period of approximately two years.  The total fair value of shares that vested during the nine months ended September 30, 2011 was approximately $93,500.

During October and November 2011, the Company granted options to purchase an aggregate of 85,000 shares of its common stock at exercise prices of $.15 and $.16 per share.