Stock Options, Warrants and 401(k) Savings Plan

12 Months Ended

Dec. 31, 2011

Stock Options, Warrants and 401(k) Savings Plan [Abstract]

Stock Options, Warrants and 401(k) Savings Plan

11. Stock Options, Warrants and 401(k) Savings Plan

The Company follows FASB ASC 718, Share Based Payment, which requires that the cost resulting from all share-based payment transactions be recognized in the Company’s financial statements. FASB ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values.

The 1996 and 1999 Stock Option Plans provided for the granting of up to 2,700,000 incentive and non-qualified stock options to employees, non-employee directors, consultants and advisors to the Company. In the case of options designated as incentive stock options, the exercise price of the options granted must be not less than the fair market value of such shares on the date of grant. Non-qualified stock options may be granted at any amount established by the Stock Option Committee or, in the case of Discounted Options issued to non-employee directors in lieu of any portion of an Annual Retainer, in accordance with a formula designated in the Plan. The 1996 Stock Option Plan terminated in June 2006 and no further stock options can be granted under the plan. The 1999 Stock Option Plan terminated in February 2009 and no further stock options can be granted under the plan; however, options granted before the termination date may be exercised through their expiration date.

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award.

A summary of stock options under the Company’s stock option plans follows:

	Number of Shares		Exercise Price Range Per Share		Weighted Average Exercise Price
Outstanding at December 31, 2009		1,325,000	$	.10 to $.45	$	.24
Options canceled		80,000		.12		.12
Options expired		300,000		.10 and .11		.10
Outstanding at December 31, 2010		945,000		.12 to .45		.29
Options expired		300,000		.215		.215
Outstanding at December 31, 2011		645,000	$	.12 and $.45	$	.32

	Option Shares		Exercise Price Range Per Share		Weighted Average Exercise Price
Exercisable options at year end:
2011		645,000	$	.12 and $.45	$	.32
Weighted average remaining contractual life (years)		1.64
Options available for future grant under all plans:
2011		0

In February 2009, the Board of Directors of the Company, under the Company’s 1999 Stock Option Plan, granted options to acquire 200,000 shares of its common stock to five employees of the Company, options to acquire 75,000 shares of its common stock to two consultants and options to acquire 50,000 shares of its common stock to an officer of the Company at $0.12 per share. The options vested in February 2010 and expire after five years. In accordance with the fair value method as described in accounting requirements of FASB ASC 718, compensation expense of approximately $22,900 was recognized over the vesting period of the options through February 2010 to account for the cost of services received by the Company in exchange for the grant of stock options. The fair value was determined using the Black-Scholes pricing model with the following assumptions: expected life-5 years; interest rate-1.81%; volatility based on the Company’s historical volatility-70% and dividend yield-0. During the year ended December 31, 2010, compensation expense of approximately $3,000 was recognized. There was no compensation expense recognized during the year ended December 31, 2011 and there was no unrecognized portion of expense at December 31, 2011.

At December 31, 2011, the Company had 85,500 warrants to purchase common stock of the Company outstanding at exercise prices ranging from $0.045 to $0.07 and expiring at various dates through November 2016. In addition to the warrants granted in conjunction with loans provided to the Company by five individuals in 2010 and 2011, the Company, in November 2011, granted warrants to purchase 20,000 shares of common stock of the Company at $0.045 per share to a professional services provider related to certain fee payment considerations granted by the individual. The warrants expire in five years. A financing cost of approximately $500, representing the fair value of the warrants, was charged to income in 2011. The fair value of the warrants was determined using the Black-Scholes pricing model with the following assumptions: expected life-5 years; interest rate 0.9%; expected volatility based on the Company’s historical volatility-72%; and dividend yield-0.

A summary of outstanding warrants follows:

	Number of Shares		Exercise Price Range Per Share		Weighted Average Exercise Price
Outstanding at December 31, 2009		47,000	$	.21 to $.27	$	.23
Warrants granted		50,500		.06 and .07		.07
Outstanding at December 31, 2010		97,500		.06 to.27		.14
Warrants granted		35,000		.045 and .06		.05
Warrants expired		47,000		.21 to .27		.23
Outstanding at December 31, 2011		85,500	$	.045 to $.07	$	.06
	Shares		Exercise Price Range Per Share		Weighted Average Exercise Price
Exercisable warrants at year end:
2011		85,500	$	.045 to $.07	$	.06
Weighted average remaining contractual life (years)		3.77

At December 31, 2011, the Company has reserved 730,500 shares of common stock for possible future issuance upon exercise of 645,000 stock options and 85,500 warrants.

The Company sponsors a 401(k) savings plan, covering substantially all employees, providing for employee and employer contributions. Employer contributions are made at the discretion of the Company. There were no contributions charged to expense during 2011 or 2010.