Share-based Compensation

3 Months Ended

Mar. 31, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-based Compensation

Note 9 - Share-based Compensation

Options

We have two nonqualified stock option plans approved by shareholders with an aggregate of approximately 2.1 million shares remaining available for grant as of March 31, 2013.  The exercise price of the options are established by the Board of Directors on the date of grant and are generally equal to the market price of the stock on the grant date.  The Board of Directors may determine the vesting period for each new grant. Options issued are exercisable in whole or in part for a period as determined by the Board of Directors of up to ten years from the date of grant.

We estimate the fair value of each option award at the grant date by using the Black-Scholes option pricing model. We did not award any options during the three months ended March 31, 2013.

Certain options awarded prior to the year ended December 31, 2012 are amortized over vesting periods encompassing the three months ended March 31, 2013, and consequently we charged to operating expenses approximately $4,700 during the three months ended March 31, 2013.

The following table summarizes our stock option activity for the three months ended March 31, 2013:

				Weighted-
	Number			Average
	of Shares			Exercise
	Issuable			Price
Balance, January 1, 2013		5,710,125		$	1.10
Granted		-			-
Exercised		-			-
Cancelled		(762,076	)		*
Balance, March 31, 2013		4,948,049		$	1.27

* less than $0.01 

The following table summarizes options outstanding at March 31, 2013:

			Weighted-		Weighted-
	Number		Average		Average		Aggregate
	of Shares		Exercise		Remaining		Intrinsic
	Issuable		Price		Term (Years)		Value
Exercisable		3,438,049	$	1.09		3.0	$	53,000
Not vested		1,510,000	$	1.70		4.3	$	-
Balance, March 31, 2013:		4,948,049	$	1.27		3.4	$	53,000

Warrants

From time to time, we compensate consultants, advisors and investors with warrants to purchase shares of our common stock, in lieu of cash payments. Net share settlement is available to warrant holders.

The following table sets forth our warrant activity during the three months ended March 31, 2013:

			Weighted-
	Number		Average
	of Shares		Exercise
	Issuable		Price
Balance, January 1, 2013		27,353,151	$	0.76
Granted		4,375,004	$	0.60
Exercised		-	$	-
Cancelled		-	$	-
Balance, March 31, 2013		31,728,155	$	0.74

The following table sets forth the warrants outstanding at March 31 2013:

			Weighted-
	Number		Average
	of Shares		Exercise
	Issuable		Price
10% convertible debenture - bonus warrants		483,357	$	0.60
10% convertible preferred stock - warrants		3,761,365	$	1.00
8% convertible promissory notes - warrants		22,195,474	$	0.60
Consultants		5,287,959	$	1.16
Total		31,728,155	$	0.74

During the three months ended March 31, 2013, pursuant to our 8% convertible promissory notes, we issued warrants to purchase 4,375,004 shares of our common stock pursuant to our issuance and sale of our 8% convertible promissory notes, at an initial exercise price of $0.60 per share. These warrants had fair values on their dates of issuances of approximately $249,200 which was recorded as a credit to derivative liabilities and a charge to debt discount associated with our 8% convertible promissory notes. See Notes 5 and 6 for further discussion of these warrants. The estimated fair value of the warrants was computed by a third party using Monte Carlo simulation models.

In addition, the fair value of a previously issued warrant which is being amortized over a service period spanning multiple reporting periods, was revalued using the Black-Scholes option pricing model, at the end of each reporting period. During the three months ended March 31, 2013, we increased the fair value by approximately $13,700 and recorded a charge in our statement of operations.