STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2011

Stockholders Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

11. STOCKHOLDERS’ EQUITY

Series A Convertible Preferred Stock

In January 1997, the Board of Directors authorized the creation of a class of Series A Convertible Preferred Stock with a par value of $.01. The Series A Convertible Preferred Stock is convertible into an equal number of common shares at the holder’s option, subject to adjustment for anti-dilution. The holders of Series A Convertible Preferred Stock are entitled to receive dividends as and if declared by the Board of Directors. In the event of liquidation or dissolution of the Company, the holders of Series A Convertible Preferred Stock are entitled to receive all accrued dividends, if applicable, plus the liquidation price of $1.00 per share. As of December 31, 2011 and 2010, there were no outstanding shares of Series A Convertible Preferred Stock.

Stock Options and Share Based Compensation

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.

Stock option activity under the 1998, 1999, 2001, 2003 and 2006 Stock Option Plans during the periods indicated below is as follows:

	Number of Shares Subject to Issuance			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2008		2,897,801			2.03		4.05 years
Granted		167,136			1.33
Forfeited or expired		(358,298	)		4.67
Exercised		(74,522	)		0.44			$	84,258
Outstanding at December 31, 2009		2,632,117			1.72		3.50 years
Granted		314,000			1.49
Forfeited or expired		(316,931	)		4.64
Exercised		(656,983	)		0.47			$	787,191
Outstanding at December 31, 2010		1,972,203			1.62		2.86 years
Granted		-			-
Forfeited or expired		(292,820	)		1.97
Exercised		(435,123	)		0.52			$	326,172
Outstanding at December 31, 2011		1,244,260		$	1.93		2.29 years	$	176,088
Exercisable at December 31, 2011		1,113,010		$	1.94		2.25 years	$	176,088

The assumptions used for the specified reporting periods and resulting estimates of weighted average fair value per share of options granted during those periods were as follows:

	Years Ended December 31,
	2011	2010	2009
Risk-free interest rate	*	2.1%	2.2%
Expected dividend yield	*	0%	0%
Expected lives	*	4.5 years	4.6 years
Expected volatility	*	77%	58%
Forfeiture rate	*	5%	5%

Expected volatility was calculated using the historical volatility of the Company’s stock price over the last five years. The expected term of the options is estimated based on the Company’s historical exercise rate and forfeiture rates are estimated based on employment termination experience. The risk free interest rate is based on U.S. Treasury yields for securities in effect at the time of grants with terms approximating the term of the grants. The assumptions used in the Black-Scholes option valuation model are highly subjective, and can materially affect the resulting valuation.

*No options were granted in the year ended December 31, 2011.

The following is a summary of stock options as of December 31, 2011:

	Options Outstanding							Options Exercisable
Range of Exercise Prices	Number of Options		Weighted- average Remaining Life			Weighted-average Exercise Price		Number of Options		Weighted- average Exercise Price
$0.46 to $1.00		447,693		2.17		$	0.50		447,693	$	0.50
$1.01 to $3.00		615,355		2.11			1.90		484,105		1.93
$3.01 to $5.00		39,500		4.29			3.50		39,500		3.50
$5.01 to $7.00		141,712		2.37			6.08		141,712		6.08
		1,244,260		2.29	years	$	1.93		1,113,010	$	1.94

The weighted-average fair value of the options granted during the years ended December 31, 2011, 2010 and 2009 is $0, $1.44 and $0.76, respectively.

As of December 31, 2011, the Company had 1,567,035 options available for future grant under the existing Stock Option and Equity Incentive Plans.

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. During the years ended December 31, 2011, 2010 and 2009 the Company recorded the fair value of $29,896, $223,133 and $147,817 for these shares in general and administrative expenses, respectively.

As of December 31, 2011, there was $91,996 of total unrecognized compensation cost, net of estimated forfeitures, related to all unvested stock options and restricted stock, which is expected to be recognized over a weighted average period of approximately 1.4 years.

Share based compensation expense for the years ended December 31, 2011, 2010 and 2009 is as follows:

	Years Ended December 31,
Compensation cost recognized:	2011		2010		2009
Stock options	$	3,991	$	250,692	$	218,007
Restricted stock		29,896		223,133		301,723
	$	33,887	$	473,825	$	519,730

Share based compensation in included in operating expenses as follows:

	Years Ended December 31,
	2011			2010		2009
Selling	$	(30,382	)	$	67,238	$	23,279
General and administrative		65,419			288,640		447,624
Research and development		(1,150	)		117,947		48,827
	$	33,887		$	473,825	$	519,730

The Company did not capitalize any share-based compensation cost in 2011, 2010 and 2009.

The Company has a net operating loss carry-forward as of December 31, 2011, and no excess tax benefits for the tax deductions related to share based awards were recognized in the statements of operations. Additionally, no incremental tax benefits were recognized from stock options exercised in 2011 that would have resulted in a reclassification to reduce net cash provided by operating activities with an offsetting increase in net cash provided by financing activities.

In the year ended December 31, 2011, certain performance based options were forfeited resulting in a reversal of share based compensation expense of $108,546.

All stock options have been issued with an exercise price that is equal or above the fair market value of the Company’s Common Stock on the date of grant.

Warrants

All previously granted warrants were issued with an exercise price that was equal to or above the fair market value of the Company’s common stock on the date of grant. As of December 31, 2011, the Company had no remaining warrants outstanding. During the year ended December 31, 2009 warrants for 66,551 common shares were exercised at an average exercise price of $0.32 per share with an intrinsic value of $48,899. No warrants were exercised in 2011 or 2010.