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Stock Based Compensation
 9 Months Ended
Sep. 30, 2012
Stock Based Compensation [Abstract]  
Stock Based Compensation
 
Note 6 – Stock Based Compensation
 
The Company has established the 2008 Equity Incentive Plan, which is a shareholder-approved plan that permits the granting of stock options and restricted stock to employees, directors and consultants. The 2008 Equity Incentive Plan provides for the issuance of up to 800,000 shares of common stock of which 50,000 shares are available for grant as Incentive Stock Options.  The exercise price for options awarded is no less than 100% of the fair market value of the common stock on the day of grant.  The options generally vest either immediately on the date of grant or 1 to 3 years from the date of grant. In March 2012, the Board of Directors approved an amendment to increase the number of shares available for award under the plan to 1,550,000.  This amendment was approved by shareholders at the Annual Meeting of Shareholders held on May 9, 2012.
 
For the nine months ended September 30, 2012, the Company recorded compensation costs for options and restricted shares granted under the plan of $495,518, as compared to $1,039,737 for the nine months ended September 30, 2011.
 
Management has valued the options at their date of grant utilizing the Black-Scholes option pricing model.  Prior to the fourth quarter of 2009, there was not a public market for the Company shares.  Accordingly, the fair value of the underlying shares was determined based on recent transactions by the Company to sell shares to third parties and other factors determined by management to be relevant to the valuation of such shares.  Beginning in the fourth quarter of 2009, the quoted price for the Company’s shares on the OTCBB was used to value the underlying shares.  Expected volatility is based upon a weighted average historical volatility of peer companies operating in a similar industry.  The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options depending on the date of the grant and expected life of the options.  The expected life of options used was based on the contractual life of the option granted.  The Company determined the expected dividend rate based on the assumption and expectation that earnings generated from operations are not expected to be adequate to allow for the payment of dividends in the near future.  The following weighted-average assumptions were utilized in the fair value calculations for options granted:
 
   
Nine Months Ended
    
Nine Months Ended
  
   
September 30,
2012
    
September 30,
2011
  
             
Expected dividend yield
    
0
%
    
0
%
Expected stock price volatility
    
96-97
%
    
95-98
%
Risk-free interest rate
    
2.37-2.70
%
    
2.9-4.19
%
Expected life of options
  
1.8-9.8 Years
    
2.8-10 Years
  
 
The following table summarizes the status of the Company’s aggregate stock options granted:
 
   
Number of Shares
Remaining
Options
    
Weighted
Average
Exercise Price
    
Weighted-Average
Remaining
Contractual Term
    
Aggregate
Intrinsic Value
  
                         
Outstanding at January 1, 2012
    
364,400
    
$
5.20
              
Options granted during 2012
    
178,000
    
$
2.05
              
Options cancelled/expired during 2012
    
(23,000
 )     
5.74
                  
Outstanding at September 30, 2012
    
519,400
    
$
4.10
      
8.08
    
$
126,478
  
Exercisable at September 30, 2012
    
378,500
    
$
4.18
      
8.05
    
$
82,728
  
 
All share and per share data have been adjusted to give effect to the one-for-twenty reverse stock split in December 2011,
as described in Note 5 to these unaudited financial statements.
   
For the nine months ended September 30, 2012, the Company recorded compensation costs for options granted under the plan of $492,466 as compared to $512,987 for the nine months ended September 30, 2011. For the nine months ended September 30, 2012, stock option grants totaled 178,000 (80,400 for the nine months ended September 30, 2011), 150,900 options vested and 23,000 options were cancelled or terminated (20,250 options were cancelled for the nine months ended September 30, 2011). No options were exercised for the nine months ended September 30, 2012 or 2011.

The weighted average fair value of options granted during the nine months ended September 30, 2012 was approximately $2.05 ($4.00 for the nine months ended September 30, 2011). 

On December 13, 2010, the Board of Directors approved a restricted stock grant award to certain employees in lieu of future salary cash payments.  The employees forfeited salary over a twelve-week period to purchase common shares, which were valued at fair market value as of the date of grant.  The Compensation Committee of the Company’s Board of Directors approved a change in the vesting date for restricted stock held by certain employees from April 1, 2011 to August 1, 2011, and then to November 15, 2012. The Compensation Committee of the Company’s Board of Directors subsequently approved amendments to change the vesting date of these restricted shares to August 20, 2013.  A total of 55,969 shares vested on April 1, 2011, and the remaining 169,368 shares are scheduled to vest on August 20, 2013.

On November 9, 2011, the Compensation Committee approved the payment of one employee’s commission of up to 50% in restricted stock at the employee’s discretion. For the nine months ended September 30, 2012, the Company expensed $3,052 for costs related to this restricted stock grant. No costs related to this restricted stock grant were expensed for the nine months ending September 30, 2011.
.
 
 
The following table summarizes the status of the Company’s restricted share awards:
 
 
Restricted Shares
  
Number of
Restricted Shares
    
Weighted Average
Fair Value at
Grant Date
  
Non-vested at  September 30, 2012
    
169,368
    
$
2.80
  
 
All share and per share data have been adjusted to give effect to the one-for-twenty reverse stock split in December 2011,
as described in Note 5 to these financial statements.
 
For the nine months ended September 30, 2012 and 2011, the aggregate expense associated with the restricted stock awards is $3,052 and $526,750, respectively.