NOTE 13 – STOCK-BASED COMPENSATION

Pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan, the aggregate number shares of the Company’s common stock available for grant of stock options and issuance is 4,341,989 shares.

In February 2011, the Company granted to the investor relations firm a warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $12.6 per share and the warrants vested immediately. The warrant was valued at $452,000 fair value, using the Black-Scholes option pricing model with assumed 193.42% volatility, a five-year expiration term, a risk free rate of 2.30% and no dividend yield. For the three-month and nine-month periods ended September 30, 2011, $0 and $452,000 were recognized as general and administrative expenses, respectively.

In early March 2011, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $9.16 per share and the options vested immediately. The options were valued at $35,000 fair value, using the Black-Scholes option pricing model with assumed 64.5% volatility, a three-year expiration term with expected tenor of 1.49 years, a risk free rate of 0.46% and no dividend yield. For the three-month and nine-month periods ended September 30, 2011, $0 and $35,000 were recognized as general and administrative expenses, respectively.

In late March 2011, the Company granted to 3 executive officers options to purchase 1,200,000 shares of the Company’s common stock at an exercise price of $4.97 per share and the options are exercisable in equal installments over periods of two years. The options were valued at $4,317,000 fair value, using the Black-Scholes option pricing model with assumed 77.22% to 94.36% volatility, a four-year expiration term with expected tenors of 2 to 2.49 years, risk free rates of 0.81% to 1.05% and no dividend yield. For the three-month and nine-month periods ended September 30, 2011, $0 and $1,945,000 was recognized as general and administrative expenses, respectively.

In late March 2011, the Company also granted to 18 management staff options to purchase 654,000 shares of the Company’s common stock at an exercise price of $4.97 per share and the options are exercisable in equal installments over periods of three years. The options were valued at $2,632,000 fair value, using the Black-Scholes option pricing model with assumed 77.22% to 118.84% volatility, a four-year expiration term with expected tenors of 2 to 3 years, risk free rates of 0.81% to 1.29% and no dividend yield. For the three-month and nine-month periods ended September 30, 2011, $0 and $706,000 were recognized as general and administrative expenses, respectively.

In early May 2011, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $2.93 per share and the option vested immediately. The option was valued at $15,800 fair value, using the Black-Scholes option pricing model with assumed 79.91% volatility, a four-year expiration term with expected tenor of 2 years, a risk free rate of 0.57% and no dividend yield. For the three-month and nine-month periods ended September 30, 2011, $15,800 was recognized as general and administrative expenses.

In late June 2011, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $3.10 per share and the option vested immediately. The option was valued at $15,200 fair value, using the Black-Scholes option pricing model with assumed 86.36% volatility, a three-year expiration term with expected tenor of 1.49 years, a risk free rate of 0.32% and no dividend yield. For the three-month and nine-month periods ended September 30, 2011, $15,200 was recognized as general and administrative expenses.

In late September 2011, the Company and certain management staff and directors mutually agreed to cancel certain unexercised and all non-vested stock options previously granted for an aggregate of 1,181,000 shares of the Company’s common stock, having exercise prices between $4.97 to $8.25 per share, without consideration. In accordance with ASC 718-20-35-9, Awards Classified as Equity — Cancellation and Replacement, the Company accelerated the remaining expense on these cancelled awards that resulted in $4,298,000 recorded in general and administrative expense during the three-month period ended September 30, 2011.

The following table summarizes all Company stock option transactions between January 1, 2011 and September 30, 2011.

	Number of Option and Warrants Outstanding			Number of Option and Warrants Non-vested			Number of Option and Warrants Vested			Range of Exercise Price per Common Share
Balance, January 1, 2011		458,971			-			458,971			$0.84 - $12.00
Granted during the nine-month period ended September 30, 2011		1,941,500			1,941,500			-			$2.93 - $12.60
Vested during the nine-month period ended September 30, 2011		-			(905,500	)		905,500			$2.93 - $12.60
Exercised during the nine-month period ended September 30, 2011		(12,500	)		-			(12,500	)		$0.84
Forfeited, canceled or expired during the nine-month period ended September 30, 2011		(1,256,000	)		(1,036,000	)		(220,000	)		$4.80 - $10.43
Balance, September 30, 2011		1,131,971			-			1,131,971			$2.93 - $12.60

Stock and Warrants Options Outstanding

Weighted Average

Outstanding

Remaining

Exercise Price of

at September 30,

2011

Range of

Exercise Prices

Contractual Life

(Years)

Options Currently

Outstanding

Exercisable and outstanding

1,131,971

2.93 - $12.60

3.17

6.34

The weighted average grant-date fair values as at September 30, 2011 and December 31, 2010 were $7.34 and $8.83, respectively.

At September 30, 2011, the aggregate intrinsic value of the stock options and warrants was $1,380,987.