STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2013

NOTE 5. STOCK-BASED COMPENSATION

Stock-based compensation expense was $123,571 and $124,626 for the nine months ended September 30, 2013 and 2012, respectively, for options previously awarded by the Company.

Stock option activity for the nine months ended September 30, 2013 is summarized as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2012		2,939,167		$	5.70			6.50	$	1,144,024
Options granted		711,667			2.46			8.81		420,796
Options forfeited		(185,000	)		(1.19	)		-		(89,080	)
Options exercised		(405,000	)		(.68	)		-		(148,577	)
Outstanding at September 30, 2013		3,060,834		$	5.89			6.32	$	1,327,163

Vested at September 30, 2013		2,268,334		$	6.97			5.45	$	722,143
Exercisable at September 30, 2013		2,268,334		$	6.97			5.45	$	722,143

Effective September 27, 2013, the Board of Directors of the Company approved the grant of (a) non-qualified stock options to purchase an aggregate of 240,000 shares of the Company's common stock and (b) incentive stock options to purchase an aggregate of 275,000 shares of the Company's common stock under the Company's 2013 Stock Incentive Plan. In addition, during the nine months ending September 30, 2013, the Company reinstated options to purchase 196,667 shares of common stock which had previously been incorrectly recorded as expired, which reinstated options are included in the table above under "Options granted".

A summary of the Company’s stock warrant activity and related information for the nine months ended September 30, 2013 is as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2012		1,163,308		$	12.37			0.40	$	128,889
Warrants exercised		(628,000	)		(1.65	)		-		(94,504	)
Warrants cancelled/forfeited/expired		(524,975	)		(25.38	)		-		(30,029	)
Warrants at September 30, 2013		10,333		$	2.42			1.90	$	4,356

Vested at September 30, 2013		4,083		$	3.43			1.74	$	1,556

Exercisable at September 30, 2013		4,083		$	3.43			1.74	$	1,556

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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