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Stock-Based Compensation
9 Months Ended
Sep. 30, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] 
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note 6.  Stock-Based Compensation

The Company accounts for the issuance of equity awards to employees in accordance with ASC Topic 718 and 505, which requires that the cost resulting from all share based payment transactions be recognized in the financial statements.  These pronouncements establish fair value as the measurement objective in accounting for share based payment arrangements and requires all companies to apply a fair value based measurement method in accounting for all share based payment transactions with employees.

In addition, the Company accounts for the issuance of equity awards to consultants in accordance with ASC Topic 505-50.  Subject to a consulting agreement described below with an investor relations firm, the Company issued 10,417 restricted shares of its common stock per month commencing March 16, 2009 through February 16, 2011.  During the three and nine month periods ending September 30, 2011 and 2010, the Company recorded the fair value of $0 and $29,896 and $37,814 and $181,464, respectively, for these shares in general and administrative expenses.

Stock based compensation expense for the three and nine months ended September 30, 2011 and 2010 is as follows:

   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2011
   
2010
   
2011
   
2010
 
Compensation cost recognized:
                       
Stock options
  $ 19,582     $ 105,043     $ (17,899 )   $ 190,679  
Restricted stock
    -       37,814       29,896       181,464  
    $ 19,582     $ 142,857     $ 11,997     $ 372,143  

In the first nine months of 2011, certain performance based options were forfeited resulting in negative stock-based compensation expense of $108,546.

Stock based compensation included in operating expenses is as follows:

   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Selling
  $ 4,155     $ 26,952     $ (34,327 )   $ 46,209  
General and administrative
    9,476       66,802       58,384       237,466  
Research & development
    5,951       49,103       (12,060 )     88,468  
    $ 19,582     $ 142,857     $ 11,997     $ 372,143  

In order to retain and attract qualified personnel necessary for the success of the Company, the Company adopted several Stock Option Plans from 1998 through 2004 (and an amendment to the 2004 plan in 2006 pursuant to which the plan was renamed the “2006 Equity Incentive Plan” and amended to provide for the issuance of other types of equity incentives such as restricted stock grants) (collectively, the “Plans”) covering up to 6,250,000 of the Company’s common shares, pursuant to which officers, directors, key employees and consultants to the Company are eligible to receive incentive stock options and nonqualified stock options. The Compensation Committee of the Board of Directors administers these Plans and determines the terms and conditions of options granted, including the exercise price.  These Plans generally provide that all stock options will expire within ten years of the date of grant.  Incentive stock options granted under these Plans must be granted at an exercise price that is not less than the fair market value per share at the date of the grant and the exercise price must not be less than 110% of the fair market value per share at the date of the grant for grants to persons owning more than 10% of the voting stock of the Company.  These Plans also entitle non-employee directors to receive grants of non-qualified stock options as approved by the Board of Directors.

Option activity under the Plans as of September 30, 2011 and changes during the nine months ended September 30, 2011 were as follows:

   
Shares
   
Weighted-
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
 
                     
Outstanding at January 1, 2011
    1,972,203     $ 1.62  
2.86 years
  $ 774,018  
Granted
    -       -            
Exercised
    (435,123 )     0.52       $ 326,172  
Forfeited or expired
    (266,615 )     1.84            
Outstanding at September 30, 2011
    1,270,465     $ 1.95  
2.50 years
  $ 242,751  
Exercisable at September 30, 2011
    1,136,715     $ 1.97  
2.46 years
  $ 242,751  

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the third quarter of 2011 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2011.  This amount changes based upon the fair market value of the Company’s stock.  The total intrinsic value of options exercised for the nine months ended September 30, 2011 was $326,172.

As of September 30, 2011, unrecognized compensation expense, net of estimated forfeitures, related to granted and non-vested stock options amounted to $116,948 and is expected to be recognized over a weighted-average period of 1.6 years.

As of September 30, 2011, the Company had 1,564,785 options available for future grant under the Plans.

The Company uses the Black-Scholes option pricing model to value the options. The table below presents the weighted average expected life of the options in years. The expected life computation is based on historical exercise patterns and post-vesting termination behavior. Volatility is determined using changes in historical stock prices. The interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

The fair value of share-based payment units was estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values as follows:

   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2011
   
2010
   
2011
   
2010
 
Weighted average fair value of grants
    *     $ 0.96       *     $ 1.44  
Valuation assumptions:
                               
Expected dividend yield
    *       0.00 %     *       0.00 %
Expected volatility
    *       79.3 %     *       77.4 %
Expected life (in years)
    *       4.50       *       4.50  
Risk-free interest rate
    *       1.60 %     *       2.13 %

* No options were granted in the three and nine month periods ended September 30, 2011.