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OPTIONS, WARRANTS AND STOCK-BASED COMPENSATION
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Mar. 31, 2012
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| Options Warrants and Stock Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options, Warrants and Stock-Based Compensation [Text Block] | 10. OPTIONS, WARRANTS AND STOCK-BASED COMPENSATION 2011 Equity Incentive Plan On March 4, 2011, the Board of Directors adopted the 2011 Equity Incentive Plan and reserved up to 50,000,000 shares of common stock for issuance to employees, directors and consultants, subject to stockholder approval by March 4, 2012. On February 17, 2012, the stockholders approved the plan. The plan also provides for automatic annual increases on January 1st of each year (commencing on January 1, 2012 and ending on January 1, 2021), in the aggregate number of shares reserved equal to the lesser of (a) five percent of the total number of shares outstanding on December 31st of the preceding year or (b) 3,000,000 shares. As of January 1, 2012, the number of shares reserved under the plan automatically increased to 53,000,000. Under the plan, the Board may grant stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards. Valuation and amortization method. The fair value of each stock award is estimated on the grant date using the Black-Scholes option-pricing model. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the vesting period. Volatility. The Company estimates volatility based on the Company’s historical volatility. Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. Expected term. The expected term of stock options granted is based on an estimate of when options will be exercised in the future. The Company applied the simplified method of estimating the expected term of the options, as described in the SEC’s Staff Accounting Bulletins 107 and 110, as the Company has had a significant change in its business operations as result of the reverse acquisition and the historical experience is not indicative of the expected behavior in the future. The expected term, calculated under the simplified method, is applied to groups of stock options that have similar contractual terms. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted. Forfeitures. Stock-based compensation expense is recorded only for those awards that are expected to vest. FASB ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. An annual forfeiture rate of 0% was applied to all unvested options as of March 31, 2012 which was management’s best estimate. This analysis will be re-evaluated semi-annually and the forfeiture rate will be adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will be for only those shares that vest. The following weighted average assumptions were used to estimate the fair value of stock options using the Black-Scholes option pricing model:
On December 14, 2011, the Board of Directors granted stock options to purchase 2,500,000 shares of common stock at an exercise price of $0.015 per share. The weighted average fair value of the options on the date of the grant was estimated at $0.008 per share. These options vest monthly over 10 months and have a term of 10 years. On January 12, 2012, the Board of Directors granted stock options to purchase120,000 shares of common stock at an exercise price of $0.0051 per share. The weighted average fair value of the options on the date of the grant was estimated at $0.004 per share. These options vest over one year and have a term of 10 years. Stock-based compensation expense for options for the three and nine months ended March 31, 2012 was $224,167 and $417,334, respectively. At March 31, 2012, unrecognized total compensation cost related to all unvested awards of $1,226,505 is expected to be recognized over a weighted average period of 1.97 years. On March 15, 2012, the Company agreed to issue a restricted stock award of 2,500,000 shares of common stock to a consultant for services to be rendered with 1,250,000 shares vesting on June 15, 2012 and 1,250,000 shares vesting on September 15, 2012. Consulting expense recorded for the restricted stock award was $4,167 for the three and nine months ended March 31, 2012. At March 31, 2012 there were 4,660,000 shares reserved for future grants. Warrants The Company’s outstanding warrants remained in place subsequent to the reverse acquisition. No warrants were exercised during the nine months ended March 31, 2012. On July 17, 2011, warrants to purchase 200,000 shares at $1.89 per share expired. The Company has reserved shares of common stock for the exercise of 75,000 outstanding warrants exercisable at $5.85 per share which expire on August 3, 2013. In February 2012, the Company issued 1,500,000 warrants in connection with the convertible notes payable (see Note 7). The warrants have an exercise price of $0.01 per share, are immediately exercisable and expire in five years. At March 31, 2012, the weighted average remaining life of the warrants is 4.7 years, the warrants are exercisable and the aggregate intrinsic value is $15,000.
Stock Award Plan The 2006 Stock Award Plan, pursuant to which the Company may award shares of common stock to employees, officers, directors, consultants and advisors, remains in place subsequent to the reverse acquisition. The Company has broad discretion in making grants under the 2006 Stock Award Plan and may make grants subject to such terms and conditions as determined by the Board of Directors. As of March 31, 2012, the Company has 111,845 shares available for future grant under the Plan. |
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