Stockholders' Equity

6 Months Ended

Jun. 30, 2011

Stockholders' Equity [Abstract]

Stockholders' Equity

3. Stockholders' Equity

Common Stock

In May 2011, the Company received gross proceeds of $23,000,000 from the sale of shares of its common stock in a public offering.  The Company sold a total of 14,375,000 shares of common stock at a price of $1.60 per share.

Warrant and stock option exercises in the first six months of 2011 and 2010 resulted in proceeds of $5,518,700 and $1,692,826, respectively, and in the issuance of 4,188,383 and 1,531,101 shares of common stock, respectively.

Stock Options and Warrants

The Company records compensation expense associated with share based awards granted to employees at the fair value of the award on the date of grant.  The expense is recognized over the period during which an employee is required to provide services in exchange for the award.

The Company’s 2008 Equity Compensation Plan (the “Plan”) allows for the grants of options, restricted stock, stock units, stock appreciation rights and/or performance awards to officers, directors, consultants and employees.  Under the Plan, the maximum number of shares of stock that may be granted to any one participant during a calendar year is 1,000,000 shares.  Options to purchase shares of common stock are granted at exercise prices not less than 100% of the fair market value on the dates of grant.  The term of the options range from three to eleven years and they vest in varying periods.  In May 2011, the shareholders approved an amendment to the Plan to increase the maximum number of shares authorized for issuance by 2,000,000 to 13,500,000 from 11,500,000.  As of June 30, 2011, the Plan had 2,117,880 shares available for grant.  The number of shares available for grant does not take into consideration potential stock awards that could result in the issuance of shares of common stock if certain performance conditions are met, discussed under “Stock Awards” below.  Stock option exercises are satisfied through the issuance of new shares.

A summary of stock option activity under the Plan as of June 30, 2011, and the changes during the six months then ended is as follows:   

	Number of  Shares			Weighted Average Exercise  Price ($)		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($)
Outstanding at December 31, 2010		7,657,876			1.18
Granted		799,614			1.65
Exercised		(528,736	)		1.24
Cancelled		(69,550	)		3.96
Outstanding at June 30, 2011		7,859,204			1.20		7.1		8,227,425
Exercisable at June 30, 2011		5,771,353			1.13		6.4		6,469,500

During the first six months of 2011 and 2010 the Company granted options to purchase a total of 799,614 and 552,487 shares of its common stock, respectively.  The options were granted at weighted average exercise prices of $1.65 and $1.49 in 2011 and 2010, respectively.  All options were granted at exercise prices which equaled the fair value of the Company’s common stock on the dates of the grants.

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Total recognized compensation expense for stock options was approximately $466,000 and $446,100 for the first six months of 2011 and 2010, respectively.  As of June 30, 2011, there was approximately $1,246,000 of total unrecognized compensation cost related to nonvested outstanding stock options that is expected to be recognized over a weighted average period of approximately two years.

The per share weighted average fair value of options granted during the first six months of 2011 and 2010 were estimated as $0.84 and $0.79 on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the table below.  Expected volatilities are based on the historical volatility of the Company’s stock price.  The weighted average expected life is based on both historical and anticipated employee behavior.

	June 30,
	2011		2010
Risk-free interest rate	1.9	%	2.2	%
Annualized volatility	59.0	%	61.0	%
Weighted average expected life, in years	5.0		5.0
Expected dividend yield	0.0	%	0.0	%

In the first six months of 2011, 3,242,134 warrants with an exercise price of $1.50 were exercised resulting in proceeds to the Company of $4,863,201 and 800,000 warrants with an exercise price of $0.80 were exercised under a cashless provision resulting in the issuance of 417,513 shares of common stock.   3,502,016 warrants with an exercise price of $1.50 expired unexercised.  Warrants to purchase a total of 10,140,909 shares of common stock were outstanding at June 30, 2011.  The weighted average exercise price of the warrants was $1.66.

The weighted average exercise price of the stock options and warrants outstanding at June 30, 2011 and 2010 was $1.46 and $1.44, respectively.

Stock Awards

The employment agreements or performance stock bonus agreements with certain members of executive management include stock-based incentives under which the executives could be awarded shares of the Company’s common stock upon the occurrence of various triggering events.  As of June 30, 2011, potential future awards under these agreements totaled approximately 425,000 shares of common stock.  There were 72,727 and 45,454 shares awarded under these agreements in the first six months of 2011 and 2010, respectively.  At times, the Company grants shares of its common stock to members of management and other employees in lieu of cash bonus awards or in recognition of special achievements.   A total of 221,267 and 170,768 shares of common stock were granted as stock awards in the first six months of 2011 and 2010, respectively.  As of June 30, 2011, a total of 192,114 shares granted in prior periods were unvested.  Expense is recognized on a straight line basis over the vesting period and is based on the fair value of the stock on the grant date.  The fair value of each stock award is determined based on the number of shares granted and the market price of the Company’s common stock on the date of grant.  Expense recognized in connection with these awards was approximately $420,000 and $103,000 in the first six months of 2011 and 2010, respectively.  The weighted average fair value of the shares granted in 2011 and 2010 was $1.63 and $1.30 per share, respectively.

Long Term Incentive Program

On May 17, 2011, the Board of Directors of the Company approved a new long term incentive program for the benefit of its executive officers.  Pursuant to the long term incentive program, the Company’s executive officers were awarded stock options and performance stock units with a value targeted at the median level of the Company’s peer group as disclosed in its 2011 definitive proxy statement.  Two thirds of that value for each officer is delivered in the form of stock options and one third of that value is delivered in the form

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of performance stock units.  A total of 317,000 options were granted on May 17, 2011 under this program.  The stock options (i) have a ten-year term, (ii) have an exercise price equal to the closing price of the Company’s common stock, as reported on AMEX, on the date of grant ($1.66), (iii) vest in quarterly installments over three years, and (iv) were otherwise granted on the same standard terms and conditions as other stock options granted pursuant to the Plan. The performance stock unit awards made to the executive officers will be vested and convert into actual shares of the Company’s common stock based on the Company’s attainment of certain performance goals measured over the three-year period beginning January 1, 2011 and ending December 31, 2013 and the executive officer’s continued employment with the Company through that period.  Each performance criterion has levels of achievement designated as threshold; target and maximum with 50% of the performance stock units vesting if the threshold level is achieved; 100% of the of the performance stock units vesting if the target level is achieved and 150% of the performance stock units vesting if the maximum level is achieved.  A total of 182,000 performance stock units were awarded at the target level.  In the event that the actual performance level achieved does not meet threshold performance (i.e., less than 50%) for an applicable performance measure, then no performance stock units will be earned and vested for that performance measure.  Threshold level performance may be achieved for one performance measure and not another based on the Company’s actual performance during the three year performance period.