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Stock-based Compensation
 3 Months Ended
Mar. 31, 2012
Stock-based Compensation

7.  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 March 31, 2012 and December 31, 2011, 100,000 options remain outstanding under this grant.

 

 

The Company currently has one stock option plan 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 March 31, 2012 and December 31, 2011, 50,000 options remain outstanding under the 1998 Plan.

 

Under the 1998 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” 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 the 1998 Plan have been fully vested and related expenses were fully amortized for the three months ended March 31, 2012.

 

For the three months ended March 31, 2012, option activity was as follows:

 

    Shares    

Weighted-

Average

Exercise

Price

    

Remaining 

Contractual 

Term

    

Aggregate 

Fair Value

  
Outstanding at beginning of period     150,000     $ 0.36      1.04     $  43,335  
Granted     -       -              
Expired and forfeited     -       -              
Exercised     -        -                
Outstanding at end of period     150,000     $ 0.36       1.04     $ 43,335  
                                 
Exercisable at March 31, 2012     150,000     $ 0.36       1.04     $ 43,335  

 

As of March 31, 2012, 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

  
0.3275-0.3800   1.04     150,000     $ 0.36       150,000     $ 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 2012 and 2011. Both directors are affiliated with the advisory services firm that is currently providing investment banking services to the Company.  Beginning in the second quarter of 2011 and continuing through 2012, the Company agreed to provide one-half of the compensation of a third director in common stock.  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 last day of the quarter with respect to which the shares were issued. For compensation paid with respect to 2011, the number of shares issued to each director was 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 $15,625 as of December 31, 2011 for three directors.  

 

On January 25, 2012, the Company issued 26,042 shares of common stock to each of two directors, and 13,022 shares to another director as compensation for the three months ended December 31, 2011.  The number of shares issued total 65,106 during the three months ended March 31, 2012.  The shares issued during the three months ended March 31, 2012 were valued at an average share price of approximately $0.24, or a total value of $15,625.

 

On April 4, 2012, the Company issued 27,174 shares of common stock to each of two directors, and 13,588 shares of common stock to another director, as compensation for the three months ended March 31 2012. These shares, totaling 67,936, were valued at an average of $0.23, or a total of $15,625.