7. Stock Purchase Warrants

On October 25, 2012, the Company entered into a Common Stock Purchase Agreement with certain accredited investors. As part of this agreement, the Company issued warrants to purchase 635,855 shares of common stock to the placement agent, or its permitted assigns. The warrants have an exercise price of $1.60 and a life of five years. The warrants vested immediately and expire October 25, 2017. Since these warrants were granted as part of an equity raise, the Company has treated them as a direct offering cost. The result of the transaction has no affect to equity. As of September 30, 2013, all the warrants were outstanding.

On March 15, 2012, the Company entered into a consulting agreement for a financial communications program, for a period of twelve months that began on February 20, 2012. As compensation for such program, the consultant is paid a monthly fee and will be issued a performance warrant exercisable for 250,000 shares of the Company’s common stock based on achievement of certain stock price milestones. Upon initiation of the program, 50,000 of the performance warrants vested. The performance warrant is exercisable for a period of two years from the date of issuance for an exercise price equal to the price ($2.20 per share) of the Company’s common stock on the date of execution (March 15, 2012). In March 2013, the performance warrants’ vesting period was extended to March 14, 2014. All other provisions of the performance warrants remain unchanged. The incremental expense related to the modification of the warrants of approximately $76,000 will be recognized over the one year extension period.

On December 20, 2011, the Company entered into a consulting agreement for financial advisory services, for a period of twelve months. As compensation for such services, the consultant was paid a monthly fee and on February 2, 2012, was issued warrants exercisable for 100,000 shares of the Company’s common stock. The warrant is exercisable upon issuance for a period of five years from the date of issue at an exercise price equal to the price ($1.14) of the Company’s common stock on the date of issue. As of September 30, 2013, all the warrants were outstanding.

A summary of warrant activity for the Company for the nine months ended September 30, 2013 and for the year ended December 31, 2012 is as follows:

			Weighted Average
	Number of Warrants		Exercise Price
Balance at December 31, 2011		3,259,186	$	1.95
Granted		985,855		1.71
Exercised		(1,768,167)		1.11
Forfeited		(844,373)		3.32
Balance at December 31, 2012		1,632,501		1.99
Granted		-		-
Exercised		-		-
Forfeited		-		-
Balance at September 30, 2013		1,632,501	$	1.99

Stock-based compensation expense included in general and administrative expenses relating to warrants issued to consultants was $0 and $1,000 for the three months ended September 30, 2013 and 2012, respectively, and $22,000 and $271,000 for the nine months ended September 30, 2013 and 2012, respectively.

A summary of all outstanding and exercisable warrants as of September 30, 2013 is as follows:

						Weighted Average
Exercise		Warrants		Warrants		Remaining		Aggregate
Price		Outstanding		Exercisable		Contractual Life		Intrinsic Value
$	1.14		100,000		100,000		3.34 years	$	54,000
$	1.32		18,182		18,182		2.25 years	$	6,000
$	1.60		635,855		635,855		4.08 years	$	51,000
$	2.20		250,000		50,000		0.45 years	$	-
$	2.22		517,257		517,257		3.16 years	$	-
$	3.30		61,207		61,207		1.66 years	$	-
$	3.75		50,000		50,000		2.38 years	$	-
$	1.99		1,632,501		1,432,501		3.03 years	$	111,000