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Stock-based compensation
9 Months Ended
Sep. 30, 2011
Stock-based compensation
8.  Stock-based compensation

On August 15, 2008, the Company granted 25,000 non-qualified stock options to each of its four directors.  These options had a vesting period of one year from the date of grant, and they became fully vested and exercisable on August 15, 2009.  These options expire on August, 15 2013 and have an exercise price of $0.38 per share.  As of September 30, 2011 and December 31, 2010, 100,000 options remain outstanding under this grant, respectively.

The Company currently has two stock option plans with outstanding options issued to its officers, employees, directors and consultants. The 1998 Stock Option Plan (“1998 Plan”) was established to grant up to 85,000 non-qualified options through May 12, 2008 to employees and other individuals providing services to the Company. Options under the 1998 Plan vest from one year to four years from the date of grant, and vested options must be exercised within 30 days of an employee’s termination. As of September 30, 2011 and December 31, 2010, 58,000 options remain outstanding under the 1998 Plan, respectively.

The 2000 Stock Award Plan (“2000 Plan”) was established to grant up to 100,000 incentive options through December 11, 2010 to employees, excluding officers and directors, and other individuals providing services to the Company. Options under the 2000 Plan vest from one year to four years from the date of grant, and vested options must be exercised within three months of an employee’s termination. As of September 30, 2011 and December 31, 2010, the 2000 Plan had zero shares outstanding, respectively.

Under both the 1998 Plan and the 2000 Plan, exercise prices of incentive stock options may not be less than 100%, and exercise prices of non-statutory stock options may not be less than 85%, of the fair market value of the common stock on the date of the grant. For persons owning 10% or more than the voting power of all classes of the Company's stock, the exercise price of the incentive or the non-qualified stock options may not be less than 110% of the fair market value of the common stock on the date of grant. Both plans are administered by the Company's board of directors.

FASB ASC 718 “Compensation-Stock Compensation ” (formerly SFAS 123(R)) requires entities to estimate the number of forfeitures expected to occur and record expense based upon the number of awards expected to vest.  The outstanding stock options under both the 1998 Plan and 2000 Plan have been fully vested and related expenses were fully amortized for the nine months ended September 30, 2011.

For the nine months ended September 30, 2011, option activity was as follows:

   
Shares
    
Weighted-
Average
Exercise
Price
    
Remaining 
Contractual 
Term
    
Aggregate 
Fair Value
  
Outstanding at beginning of period
    
158,000
    
$
0.36
              
Granted
    
-
      
-
              
Expired and forfeited
    
-
      
-
              
Exercised
    
-
      
-
              
Outstanding at end of period
    
158,000
    
$
0.36
      
1.47
    
$
43,335
  
                                 
Exercisable at September 30, 2011
    
158,000
    
$
0.36
      
1.47
    
$
43,335
  

As of September 30, 2011, a summary of options outstanding under the Company’s 1998 Plan and other non-qualified stock options was as follows:

Range of 
Exercise 
Price
  
Weighted-Average Remaining Contractual Life 
(Years)
  
Number
Outstanding
    
Weighted-
Average 
Exercise 
Price
    
Number
Exercisable
    
Weighted-
Average 
Exercise 
Price
  
0.3275-0.4000
  
1.47
    
158,000
    
$
0.36
      
158,000
    
$
0.36
  

In addition, the Company has outstanding 30,000 warrants issued in lieu of consulting fees, which expire in July 2014 and have an exercise price of $0.63 per share.


The Company agreed to compensate two of its directors in the form of common stock for 2010 and three of its directors in the form of common stock for 2011. The number of shares issued to each director is determined based upon the equivalent cash compensation accrued divided by the closing price of the Company’s common stock on the issuance date. The Company recorded accrued stock-based compensation of $25,000 as of December 31, 2010 for two directors.  On February 16, 2011, the Company issued 74,646 shares to these directors.  The Company recorded stock-based compensation for the three months ended March 31, 2011 of $12,500 total for two directors.  On June 2, 2011, the Company issued 33,784 shares to these directors.  The Company recorded stock-based compensation for the three months ended June 30, 2011 of $15,625 total for three directors.  On July 7, 2011, the Company issued 42,230 shares to these directors.  The Company recorded stock-based compensation for the three months ended September 30, 2011 of $15,625 total for three directors.  On October 13, 2011, the Company issued 55,805 shares to these directors.  See Note 12 below.