STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2013

STOCKHOLDERS' EQUITY [Abstract]

SHAREHOLDERS' EQUITY

Note 6 – Stockholders' Equity

Preferred Stock

The Company is authorized to issue 2,000,000 shares of preferred stock, of which none were issued and outstanding as of March 31, 2013 and December 31, 2012.

Common Stock, Options and Stock Grants

Three Months Ended March 31, 2013

During the three months ended March 31, 2013, 27,277 restricted common shares with an aggregate grant date fair value of approximately $20,000 vested. During the three months ended March 31, 2013, the Company issued 55,181 shares of commons stock with a grant date fair value of approximately $42,000 to a member of its board of Directors for past services.  During the three months ended March 31, 2013, the Company granted, to an employee of the Company, an option to acquire 15,000 shares of common stock for an exercise price of $1.15 per share, exercisable over a term of five years from the date of grant.  The option vests over a four year period, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting in equal monthly amounts through the fourth anniversary of the grant date. The Company estimated the grant date fair value of the stock option using the Black-Scholes option model and the following assumptions: volatility of 150%, risk free rate of 0.4%, dividend rate of zero, and expected term of 3.75 years.  The grant date fair value of the stock options was determined to be approximately $10,000.  During the three months ended March 31, 2013, the Company recognized approximately $29,000 of expense related to the vesting of stock options.

Three Months Ended March 31, 2012

During the three months ended March 31, 2012, 23,952 restricted common shares with an aggregate grant date fair value of approximately $18,000 vested.  During the three months ended March 31, 2012, the Company granted, to two officers of the Company, options to acquire an aggregate of 480,000 shares of common stock for an exercise price of $1.15 per share, exercisable over a term of five years from the date of grant.  The options vest over a four year period, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting in equal monthly amounts through the fourth anniversary of the grant date. The Company estimated the grant date fair value of the stock options using the Black Scholes option model and the following assumptions: volatility of 175%, risk free rate of 0.36%, dividend rate of zero, and expected term of 3.75 years.  The grant date fair value of the stock options was determined to be approximately $298,000, of which approximately $19,000 was recognized as stock compensation expense for the three months ended March 31, 2012.

Stock Option Plans

The Company grants options under multiple stock-based compensation plans that do not differ substantially in the characteristics of the awards.  Nonqualified and incentive stock options have been granted to directors, officers and employees of the Company under the Company's Stock Option Plans.  Options generally vest over three to four years and expire five years from the date of the grant.  As of March 31, 2013, 438,285 shares were available for issuance under the stock option plans, though as discussed in Note 9, 315,857 shares will no longer be available due to the expiration of the respective option plans on April 1, 2013.  Awards that expire or are cancelled without delivery of shares generally become available for issuance under the plans.

The following is a summary of stock option activity for three months ended March 31, 2013, relating to all of the Company's common stock plans:

						Weighted Average
				Weighted		Remaining
	Shares			Average Exercise		Contractual Term		Aggregate Intrinsic Value
	(in thousands)			Price		(in years)		(in thousands)
Outstanding at January 1, 2013		906		$	1.17		3.90	$	--
Granted		15		$	1.15		4.96	$	--
Expired		(50	)	$	1.50			$	--
Forfeited		(8	)	$	1.15			$	--
Outstanding at March 31, 2013		863		$	1.15		3.91	$	--
Exercisable at March 31, 2013		208		$	1.16		3.63	$	--

The following table summarizes stock option information as of March 31, 2013:

Outstanding Options
				Weighted Average
		Number Outstanding		Remaining	Options Exercisable
Exercise Prices		(in thousands)		Contractual Life	(in thousands)
$	1.20		38	3.2 years		38
$	1.15		825	4.0 years		170
Total			863	3.9 years		208

As of March 31, 2013, there was approximately $364,000 of unrecognized compensation costs related to stock options outstanding.

Restricted Stock Grants

A summary of the status of the Company's non-vested stock grants as of March 31, 2013 and changes during the three months ended March 31, 2013 is presented below:

Non-Vested Shares	Shares (in thousands)			Weighted-Average Grant Date Fair Value
Non-Vested at January 1, 2013		60		$	0.66
Granted		98		$	0.82
Vested		(27	)	$	0.73
Non-Vested at March 31, 2013		131		$	0.76

The future expected expense for non-vested shares is approximately $100,000 and will be recognized as expense through December 31, 2014.