Document And Entity Information
v4.1.217.0
Document And Entity Information
 6 Months Ended
Jun. 30, 2011
Aug. 11, 2011
Document And Entity Information    
Document Type POS AM  
Amendment Flag false  
Document Period End Date Jun. 30, 2011
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2011  
Entity Registrant Name NEPHROS INC  
Entity Central Index Key 0001196298  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding    

Condensed Consolidated Balance Sheets
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Condensed Consolidated Balance Sheets (USD $)
In Thousands
Jun. 30, 2011
Dec. 31, 2010
Dec. 31, 2009
ASSETS      
Cash and cash equivalents $ 1,713 $ 240 $ 1,004
Accounts receivable 587 326 629
Inventory, less allowances of $18 334 726 653
Prepaid expenses and other current assets 99 190 135
Total current assets 2,733 1,482 2,421
Property and equipment, net 61 108 210
Other assets     21
Total assets 2,794 1,590 2,652
LIABILITIES AND STOCKHOLDERS' EQUITY      
Short-term borrowings   500  
Accounts payable 464 441 455
Accrued expenses 102 481 239
Deferred revenue   33  
Total current liabilities 566 1,455 694
Total liabilities   1,455 694
Commitments and Contingencies      
Stockholders' equity:      
Preferred stock      
Common stock 10 2 2
Additional paid-in capital 95,365 92,019 91,855
Accumulated other comprehensive income 70 22 76
Accumulated deficit (93,217) (91,908) (89,975)
Total stockholders' equity 2,228 135 1,958
Total liabilities and stockholders' equity $ 2,794 $ 1,590 $ 2,652

Condensed Consolidated Balance Sheets (Parenthetical)
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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data
Jun. 30, 2011
Dec. 31, 2010
Dec. 31, 2009
Condensed Consolidated Balance Sheets      
Inventory, allowances $ 18 $ 18 $ 18
Preferred stock, par value $ 0.001 $ 0.001 $ 0.001
Preferred stock, shares authorized 5,000,000 5,000,000 5,000,000
Preferred stock, shares issued 0 0 0
Preferred stock, shares outstanding 0 0 0
Common stock, par value $ 0.001 $ 0.001 $ 0.001
Common stock, shares authorized 90,000,000 4,500,000 4,500,000
Common stock, shares issued 10,065,118 2,090,552 2,080,240
Common stock, shares outstanding 10,065,118 2,090,552 2,080,240

Condensed Consolidated Statements Of Operations
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Condensed Consolidated Statements Of Operations (USD $)
In Thousands, except Share data
 3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
Dec. 31, 2010
Dec. 31, 2009
Condensed Consolidated Statements Of Operations            
Product revenue $ 637 $ 809 $ 1,318 $ 1,799 $ 2,938 $ 2,661
Cost of goods sold 434 527 916 1,127 1,816 1,744
Gross margin 203 282 402 672 1,122 917
Operating expenses:            
Research and development 112 71 204 143 362 280
Depreciation and amortization 24 32 48 68 129 231
Selling, general and administrative 665 545 1,394 1,353 2,520 2,812
Total operating expenses 801 648 1,646 1,564 3,011 3,323
Loss from operations (598) (366) (1,244) (892) (1,889) (2,406)
Interest income 1 1 1 1 1 9
Interest expense     (12)   (15) (2)
Amortization of debt issuance costs     (40)   (50)  
Other income (expense) (5)   (14) (2) 20 373
Net loss $ (602) $ (365) $ (1,309) $ (893) $ (1,933) $ (2,026)
Net loss per common share, basic and diluted $ (0.06) $ (0.18) $ (0.19) $ (0.43) $ (0.93) $ (1.02)
Weighted average common shares outstanding, basic and diluted 10,065,118 2,086,771 7,052,504 2,083,506 2,087,068 1,981,467

Consolidated Statement Of Changes In Stockholders' Equity
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Consolidated Statement Of Changes In Stockholders' Equity (USD $)
In Thousands, except Share data
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Other Income (Loss) [Member]
Accumulated Deficit [Member]
Total
Balance at Dec. 31, 2008 $ 2 $ 90,411 $ 70 $ (87,949) $ 2,534
Balance, shares at Dec. 31, 2008 1,908,269        
Comprehensive income:          
Net loss       (2,026) (2,026)
Net unrealized income (losses) on foreign currency translation     6   6
Comprehensive loss         (2,020)
Cashless exercise of warrants 91,473        
Private placement sale of common stock   1,251     1,251
Private placement sale of common stock, shares 67,258        
Exercise of stock options   85     85
Exercise of stock options, shares 13,239        
Noncash stock-based compensation   108     108
Balance at Dec. 31, 2009 2 91,855 76 (89,975) 1,958
Balance, shares at Dec. 31, 2009 2,080,239        
Comprehensive income:          
Net loss       (1,933) (1,933)
Net unrealized income (losses) on foreign currency translation     (54)   (54)
Comprehensive loss         (1,987)
Exercise of stock options   72     72
Exercise of stock options, shares 10,313        
Noncash stock-based compensation   92     92
Balance at Dec. 31, 2010 $ 2 $ 92,019 $ 22 $ (91,908) $ 135
Balance, shares at Dec. 31, 2010 2,090,552        

Condensed Consolidated Statements Of Cash Flows
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Condensed Consolidated Statements Of Cash Flows (USD $)
In Thousands
 6 Months Ended 12 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Dec. 31, 2010
Dec. 31, 2009
Operating activities        
Net loss $ (1,309) $ (893) $ (1,933) $ (2,026)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation of property and equipment 48 68 129 231
Non-cash stock-based compensation 165 49 92 108
Deferred revenue (33)   33  
Amortization of debt issuance costs 40   50  
Non-cash interest 12   15  
Inventory reserve       18
(Increase) decrease in operating assets:        
Accounts receivable (239) (78) 283 (220)
Inventory 410 (101) (98) 57
Prepaid expenses and other current assets 92 44 (55) 27
Other assets     21  
Increase (decrease) in operating liabilities:        
Accounts payable and accrued expenses (274) 192 171 (702)
Accrued severance expense       (105)
Net cash used in operating activities (1,088) (719) (1,292) (2,612)
Investing activities        
Purchase of property and equipment     (30) (28)
Maturities of short-term investments       7
Net cash used in investing activities     (30) (21)
Financing activities        
Repayment of debt (500)      
Payment of financing costs (140)      
Proceeds from short-term borrowings     500  
Proceeds from stock options exercised   72 72 85
Proceeds from issuance of common stock 3,190     1,251
Net cash provided by financing activities 2,550 72 572 1,336
Effect of exchange rates on cash 11 (13) (14) (5)
Net increase (decrease) in cash 1,473 (660) (764) (1,302)
Cash, beginning of period 240 1,004 1,004 2,306
Cash, end of period 1,713 344 240 1,004
Supplemental disclosure of cash flow information        
Cash paid for interest       2
Cash paid for taxes $ 2 $ 2 $ 2 $ 6

Basis Of Presentation And Going Concern
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Basis Of Presentation And Going Concern
 6 Months Ended 12 Months Ended
Jun. 30, 2011
Dec. 31, 2010
Basis Of Presentation And Going Concern    
Basis Of Presentation And Going Concern

1. Basis of Presentation and Going Concern

On January 10, 2011, the Company's stockholders voted to implement a 1:20 reverse stock split of the Company's common stock.  The reverse split became effective on March 11, 2011.  All of the share and per share amounts discussed in these condensed consolidated interim financial statements on Form 10-Q have been adjusted to reflect the effect of this reverse split.

Interim Financial Information

The accompanying unaudited condensed consolidated interim financial statements of Nephros, Inc. and its wholly owned subsidiary, Nephros International Limited (collectively, the "Company") should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 29, 2011 and Form 10-K/A filed with the SEC on April 28, 2011. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying condensed consolidated financial statements do not include all of the information and notes required by GAAP for a complete financial statement presentation. The condensed consolidated balance sheet as of December 31, 2010 was derived from the Company's audited consolidated financial statements but does not include all disclosures required by GAAP. In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments consisting of normal, recurring adjustments that are necessary for a fair presentation of the financial position, results of operations and cash flows for the condensed consolidated interim periods presented. Interim results are not necessarily indicative of results for a full year. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amount of revenues and expenses, during the reporting period. Actual results could differ materially from those estimates.

Going Concern and Management's Response

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company's recurring losses and difficulty in generating sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern. The Company's condensed consolidated interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company has incurred significant losses in operations in each quarter since inception. For the six months ended June 30, 2011 and 2010, the Company has incurred net losses of $1,309,000 and $893,000, respectively. In addition, the Company has not generated positive cash flow from operations for the six months ended June 30, 2011 and 2010. To become profitable, the Company must increase revenue substantially and achieve and maintain positive gross and operating margins. If the Company is not able to increase revenue and gross and operating margins sufficiently to achieve profitability, its results of operations and financial condition will be materially and adversely affected.

On October 1, 2010, the Company issued a senior secured note to Lambda Investors LLC, its largest stockholder, in the principal amount of $500,000. The note bore interest at the rate of 12% per annum and was to mature on April 1, 2011, at which time all principal and accrued interest was due. However, the Company agreed to and did prepay, without penalty, amounts due under the note with the cash proceeds from its rights offering prior to the maturity date. The note was secured by a first priority lien on all of the Company's property, including its intellectual property.

On March 10, 2011 the Company completed its rights offering and a private placement that together resulted in gross proceeds of approximately $3.2 million. The aggregate net proceeds were approximately $2.3 million, after deducting the estimated aggregate expenses of these transactions which approximated $200,000, the repayment of the $500,000 note, plus $26,650 of accrued interest thereon, issued to Lambda Investors, LLC, the payment of an 8% sourcing/transaction fee of $40,000  in respect of the note and an aggregate of $100,000 for reimbursement of Lambda Investors' legal fees incurred in connection with the loan and the rights offering.
After giving effect to the 1:20 reverse stock split on March 11, 2011, the Company's stockholders subscribed for 4,964,854 units in the rights offering and the Company accepted all basic subscription rights and oversubscription privileges. The units were sold at a per unit purchase price of $0.40. Gross proceeds to the Company from the sale of these units in the rights offering were approximately $2.0 million. The Company issued an aggregate of 4,964,854 shares of common stock and warrants to purchase an aggregate of approximately 4.6 million shares of its common stock to stockholders who subscribed.

Simultaneously with the closing of the rights offering, Lambda Investors, LLC purchased in a private placement 3,009,711 units at the same per unit purchase price of $0.40, pursuant to a purchase agreement between the Company and Lambda Investors. The Company issued to Lambda Investors an aggregate of 3,009,711 shares of common stock and warrants to purchase an aggregate of 2,782,579 shares of common stock. Of the $3.2 million in gross proceeds from the rights offering and the private placement, the Company received approximately $1.2 million in gross proceeds from the sale of units to Lambda Investors.

The Company effected a reverse stock split, in which every 20 shares of our common stock issued and outstanding immediately prior to the effective time, which was 5:00 p.m. on March 11, 2011, were converted into one share of common stock. Fractional shares were not issued and stockholders who otherwise would have been entitled to receive a fractional share as a result of the reverse stock split received an amount in cash equal to $0.04 per pre-split share for such fractional interests. The number of shares of common stock issued and outstanding was reduced from approximately 201,300,000 pre-split to approximately 10,100,000 post-split. The reverse stock split was effected in connection with the rights offering and private placement.

 The reverse stock split was approved by the Company's stockholders at the annual meeting held on January 10, 2011. The number of shares of common stock subject to outstanding stock warrants and options, and the exercise prices and conversion ratios of those securities, were automatically proportionately adjusted for the 1-for-20 ratio provided for by the reverse stock split.

The Company entered into a License Agreement with Bellco S.r.l., as  licensee ("Bellco), which is discussed in Footnote 12, Subsequent Events.  This Agreement provides the Company with payments of €500,000, €750,000, and €600,000 on July 1, 2011, January 15, 2012 and January 15, 2013, respectively. These fixed payments of €1,850,000 or approximately $2,600,000, take place over the next eighteen months.  Beginning on January 1, 2015 through and including December 31, 2016, Bellco will pay to Nephros a royalty based on the number of units of products sold in the territory as follows: for the first 103,000 units sold,  €4.50 per unit; thereafter, €4.00 per unit.  The first fixed payment was received in July 2011.  Anticipated  payments from this License Agreement will be a positive source of cash flow to the Company.
 
There can be no assurance that the Company's future cash flow will be sufficient to meet its obligations and commitments. If the Company is unable to generate sufficient cash flow from operations in the future to service its commitments the Company will be required to adopt alternatives, such as seeking to raise debt or equity capital, curtailing its planned activities or ceasing its operations. There can be no assurance that any such actions could be effected on a timely basis or on satisfactory terms or at all, or that these actions would enable the Company to continue to satisfy its capital requirements.

Note 1 — Organization and Nature of Operations

Nephros, Inc. ("Nephros" or the "Company") was incorporated under the laws of the State of Delaware on April 3, 1997. Nephros was founded by health professionals, scientists and engineers affiliated with Columbia University to develop advanced End Stage Renal Disease ("ESRD") therapy technology and products. The Company has three products in various stages of development in the hemodiafiltration, or HDF, modality to deliver improved therapy for ESRD patients. These are the OLpur  TM   MDHDF filter series or "dialyzers," designed expressly for HDF therapy, the OLpur  TM   H2H  TM, an add-on module designed to allow the most common types of hemodialysis machines to be used for HDF therapy, and the OLpur  TM NS2000 system, a stand-alone hemodiafiltration machine and associated filter technology.  In 2006, the Company introduced its Dual Stage Ultrafilter ("DSU") water filter system, which represents a new and complementary product line to the Company's existing ESRD therapy business. The DSU incorporates the Company's unique and proprietary dual stage filter architecture.

On June 4, 2003, Nephros International Limited was incorporated under the laws of Ireland as a wholly-owned subsidiary of the Company.  In August 2003, the Company established a European Customer Service and financial operations center in Dublin, Ireland.

Concentration Of Credit Risk
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Concentration Of Credit Risk
 6 Months Ended 12 Months Ended
Jun. 30, 2011
Dec. 31, 2010
Concentration Of Credit Risk    
Concentration Of Credit Risk
2. Concentration of Credit Risk

For the six months ended June 30, 2011 and 2010, the following customers accounted for the following percentages of the Company's sales, respectively.

Customer
  
2011
    
2010
  
A
     56 %     49 %
B
     19 %     37 %

As of June 30, 2011 and December 31, 2010, the following customers accounted for the following percentages of the Company's accounts receivable, respectively.

Customer
  
2011
    
2010
  
A
     58 %     72 %
B
     16 %     12 %

The Company's OLpur MDHDF filter series and Dual Stage Ultrafilter water filtration system products are manufactured by the same vendor.
Note 11 — Concentration of Credit Risk

Cash and cash equivalents are financial instruments which potentially subject the Company to concentrations of credit risk. The Company deposits its cash in financial institutions. At times, such deposits may be in excess of insured limits. To date, the Company has not experienced any impairment losses on its cash and cash equivalents.

Major Customers

For the year ended December 31, 2010 and 2009, two customers accounted for 79% and 87%, respectively, of the Company's sales.  In addition, as of December 31, 2010 and 2009, those customers accounted for 84% and 78%, respectively, of the Company's accounts receivable.

Revenue Recognition
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Revenue Recognition
 6 Months Ended
Jun. 30, 2011
Revenue Recognition  
Revenue Recognition
3. Revenue Recognition

Revenue is recognized in accordance with Accounting Standards Codification ("ASC") Topic 605. Four basic criteria must be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the fee is fixed or determinable; and (iv) collectability is reasonably assured.

The Company recognizes revenue related to product sales when delivery is confirmed by its external logistics provider and the other criteria of ASC Topic 605 are met. Product revenue is recorded net of returns and allowances. All costs and duties relating to delivery are absorbed by Nephros. All shipments are currently received directly by the Company's customers.

Prepaid Expenses And Other Current Assets
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Prepaid Expenses And Other Current Assets
 12 Months Ended
Dec. 31, 2010
Prepaid Expenses And Other Current Assets  
Prepaid Expenses And Other Current Assets
Note 4 — Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets as of December 31, 2010 and 2009 were as follows:

   
December 31,
     
2010
      
2009
  
Prepaid insurance premiums
  
$
120,000
    
$
126,000
  
Deferred debt issuance costs
    
40,000
      
-
  
Security deposit
    
21,000
      
-
  
Other
    
9,000
      
9,000
  
Prepaid expenses and other current assets
  
$
190,000
    
$
135,000

Stock-Based Compensation
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Stock-Based Compensation
 6 Months Ended 12 Months Ended
Jun. 30, 2011
Dec. 31, 2010
Stock-Based Compensation    
Stock-Based Compensation
4. Stock-Based Compensation

The Company accounts for stock option grants to employees and non-employee directors under the provisions of ASC 718, Stock Compensation. ASC 718 requires the recognition of the fair value of stock-based compensation in the statement of operations. In addition, the Company accounts for stock option grants to consultants under the provisions of ASC 505-50, Equity-Based Payments to Non-Employees, and as such, these stock options are revalued at each reporting period through the vesting period.

The fair value of stock option awards is estimated using a Black-Scholes option pricing model.  The fair value of stock-based awards is amortized over the vesting period of the award using the straight-line method.

The Company granted 612,500 stock options during the six months ended June 30, 2011 to employees, non-employee directors and consultants. These stock options vest 40% immediately and the remaining 60% annually over a three-year period and will be expensed over the applicable vesting period. The fair value of all stock-based awards granted during the six months ended June 30, 2011 was approximately $267,000.

The following assumptions were used for options granted for the six months ended June 30, 2011.

Assumptions for Option Grants
  
Six Months
Ended
June 30, 2011
  
Risk-free interest rate
    
2.31 - 2.42%
  
Volatility
    
122%
  
Expected dividend yield
    
—
  
Expected term
  
5.5 yrs
  

The Company calculates expected volatility for a stock-based grant based on historic monthly stock price observations of common stock during the period immediately preceding the grant that is equal in length to the expected term of the grant. The Company also estimates future forfeitures at 5.8% as a part of the estimate of expense as of the grant date. The Company has used historical data to estimate expected employee behaviors related to forfeitures. With respect to grants of options, the risk free rate of interest is based on the U.S. Treasury rates appropriate for the expected term of the grant.

Stock-based compensation expense was approximately $165,000 and $49,000 for the six months ended June 30, 2011 and 2010, respectively. This expense is presented as part of the operating results in Selling, General and Administrative expenses on the accompanying condensed consolidated statement of operations.

There was no tax benefit related to expense recognized in the three and six months ended June 30, 2011 and 2010, as the Company is in a net operating loss position. As of June 30, 2011, there was approximately $225,000 of total unrecognized compensation cost related to unvested share-based compensation awards granted under the equity compensation plans which will be amortized over the weighted average remaining requisite service period of 2.3 years. Such amount does not include the effect of future grants of equity compensation, if any. Of the total $225,000, the Company expects to recognize approximately 28% in the remaining interim periods of 2011, approximately 35% in 2012, approximately 31% in 2013 and approximately 6% in 2014.
Note 8 — Stock Plans, Share-Based Payments and Warrants

Stock Plans

In 2000, the Company adopted the Nephros 2000 Equity Incentive Plan. In January 2003, the Board of Directors adopted an amendment and restatement of the plan and renamed it the Amended and Restated Nephros 2000 Equity Incentive Plan (the "2000 Plan"), under which 106,538 shares of common stock had been authorized for issuance upon exercise of options granted.
 
As of December 31, 2010 and 2009, 2,053 options had been issued to non-employees under the 2000 Plan and were outstanding. Such options expire at various dates through March 15, 2014, all of which are fully vested. As of December 31, 2010 and 2009, 7,230 options had been issued to employees under the 2000 Plan and were outstanding. Such options expire at various dates between January 22, 2013 and March 15, 2014, all of which are fully vested.

The Board retired the 2000 Plan in June 2004, and thereafter no additional awards may be granted under the 2000 Plan.

In 2004, the Board of Directors adopted and the Company's stockholders approved the Nephros, Inc. 2004 Stock Incentive Plan, and, in June 2005, the Company's stockholders approved an amendment to such plan (as amended, the "2004 Plan"), that increased to 40,000 the number of shares of the Company's common stock that are authorized for issuance by the Company pursuant to grants of awards under the 2004 Plan. In May 2007, the Company's stockholders approved an amendment to the 2004 Plan that increased to 65,000 the number of shares of the Company's common stock that are authorized for issuance by the Company pursuant to grants of awards under the 2004 Plan. In addition, in June 2008, the Company's stockholders approved an amendment to the 2004 Plan that increased to 134,849 the number of shares of the Company's common stock that are authorized for issuance by the Company pursuant to grants of awards under the 2004 Plan.

As of December 31, 2009, 75,879 options had been issued to employees under the 2004 Plan and were outstanding. The options expire on various dates between January 5, 2016 and December 31, 2019, and vest upon a combination of the following: immediate vesting or straight line vesting of two or four years. At December 31, 2009, there were 77,194 shares available for future grants under the 2004 Plan. As of December 31, 2009, 9,128 options had been issued to non-employees under the 2004 Plan and were outstanding. Such options expire at various dates between November 11, 2014 and August 14, 2019, and vest upon a combination of the following: immediate vesting or straight line vesting of two or four years.

As of December 31, 2010, 22,129 options had been issued to employees under the 2004 Plan and were outstanding. The options expire on various dates between January 5, 2016 and December 31, 2019, and vest upon a combination of the following: immediate vesting or straight line vesting of two or four years. At December 31, 2010, there were 82,535 shares available for future grants under the 2004 Plan. As of December 31, 2010, 13,253 options had been issued to non-employees under the 2004 Plan and were outstanding. Such options expire at various dates between November 11, 2014 and January 8, 2020, and vest upon a combination of the following: immediate vesting or straight line vesting of two or four years.

Share-Based Payment

Prior to the Company's initial public offering, options were granted to employees, non-employees and non-employee directors at exercise prices which were lower than the fair market value of the Company's stock on the date of grant. After the date of the Company's initial public offering, stock options are granted to employees, non-employees and non-employee directors at exercise prices equal to the fair market value of the Company's stock on the date of grant. Stock options granted have a life of 10 years.  Unvested options as of December 31, 2010 currently vest upon a combination of the following: immediate vesting or straight line vesting of two or four years.

Expense is recognized, net of expected forfeitures, over the vesting period of the options. For options that vest upon the achievement of certain milestones, expense is recognized when it is probable that the condition will be met. Stock based compensation expense recognized for the years ended December 31, 2010 and 2009 was approximately $92,000 or less than $0.05 per share and approximately $108,000 or less than $0.06 per share, respectively.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the below assumptions related to risk-free interest rates, expected dividend yield, expected lives and expected stock price volatility.

   
Option Pricing Assumptions
  
Grant Year 
  
2010
    
2009
  
Stock Price Volatility
     96 %     93% - 96 %
Risk-Free Interest Rates
     2.85 %     2.51% - 3.04 %
Expected Life (in years)
     5.75       5.75 – 6.25  
Expected Dividend Yield
     0 %     0 %
 
Expected volatility is based on historical volatility of the Company's common stock at the time of grant. The risk-free interest rate is based on the U.S. Treasury yields in effect at the time of grant for periods corresponding with the expected life of the options. For the expected life, the Company is using the simplified method as described in the SEC Staff Accounting Bulletin 107. This method assumes that stock option grants will be exercised based on the average of the vesting periods and the option's life.

The total fair value of options vested during the fiscal year ended December 31, 2010 was approximately $87,000. The total fair value of options vested during the fiscal year ended December 31, 2009 was approximately $157,000.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2010:

     
Options Outstanding
    
Options Exercisable
  
                                 
Range of Exercise
Price
    
Number
Outstanding as
of December
31, 2010
    
Weighted
 Average
 Remaining
Contractual
Life in
Years
    
Weighted
 Average
Exercise
 Price
    
Number
 Exercisable as
of
 December 31,
 2010
    
Weighted
Average
 Exercise Price
  
                                 
$2.60      
1,650
      
8.02
    
$
2.60
      
413
    
$
2.60