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Employee Stock Options

12 Months Ended

Dec. 31, 2011

Note 8: Employee Stock Options

On August 9, 2010, the shareholders of the Company approved the 2010 Equity Incentive Plan (the “Plan”). Under the terms of the Plan, 150,000 shares of the Company’s common stock are authorized for the issuance of stock options and restricted stock. The Plan also provides for an annual increase in the number of authorized shares of common stock issuable beginning in fiscal 2011 equal to the lesser of (a) 2% of shares outstanding on the last day of the immediate preceding fiscal year, (b) 50,000 shares, or (c) such lesser number of shares as the Company’s board of directors shall determine, provided, however, in no event shall the maximum number of shares that may be issued under the Plan pursuant to stock awards be greater than 15% of the aggregate shares outstanding on the last day of the immediately preceding fiscal year. With the automatic increases, there were 185,371 shares of common stock authorized under the Plan at December 31, 2011, which increased to 220,416 shares of common stock on January 1, 2012.

The following is a summary of stock options issued during the year ended December 31, 2011 and 2010:

	Number of Options Outstanding			Range of Exercise Price				Weighted Average Exercise Price	Aggregate Intrinsic Value
Balance at December 31, 2009	-					-		-
Options granted		100,000			$		2.10 - $2.32	$2.13	$16,700
Balance at December 31, 2010		100,000			$		2.10 - $2.32	$2.13	$16,700
Options granted		30,000			$		1.70 - $2.30	$1.82	$13.240
Options forfeited		(2,500	)		$		1.70 - $2.10	$1.78	$1,175
Balance at December 31, 2011		127,500			$		1.70 - $2.32	$2.07	$24,590

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e. the aggregate difference between the closing price of our common stock on December 31, 2011 and 2011 of $2.25 and $2.20, respectively, and the exercise price for in-the-money options) that would have been received by the holders if all instruments had been exercised on December 31, 2011 and 2010. As of December 31, 2011, there was $100,734 of unrecognized compensation cost related to our unvested stock options, which will be recognized through 2014.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2011:

		Options Outstanding						Options Exercisable
Range of Exercise Price		Number		Weighted Average Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Number		Weighted Average Exercise Price
$	1.70 to $2.32		127,500		8.80	$	2.07		52,000	$	2.16

Of the 127,500 stock options outstanding, 80,000 are non-qualified stock options. All of the options have been registered with the SEC.

The fair value of common stock options issued during the year ended December 31, 2011 and 2010 were estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used:

	Year ended December 31, 2011			Year ended December 31, 2010
Expected dividend yield		0	%		0	%
Expected stock price volatility		157	%		181	%
Weighted-average risk-free interest rate		1.81	%		1.14	%
Weighted-average expected life of options (in years)		5.4			5.2

During the year ended December 31, 2011 and 2010, we recorded expense of $101,144 and $32,245, respectively, related to these stock options. No options had been exercised as of December 31, 2011.