Equity-Based Compensation

9 Months Ended

Sep. 30, 2012

Equity-Based Compensation [Abstract]

Equity-Based Compensation

Note 3: Equity-Based Compensation

The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option valuation model.Expected volatility is based on the historical volatility of the price of the Company's stock.The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option.The Company uses historical data to estimate expected dividend yield, expected life and forfeiture rates.Accordingly, the fair values of the options granted, were estimated based on the following weighted average assumptions:

	Nine Months Ended September 30,
	2012	2011
Risk-free interest rate	0.68% - 0.86%	0.89% - 2.24%
Expected dividend yield	-	-
Expected lives	5.0 years	5.0 years
Expected volatility	108.76%-111.95%	104.29 - 104.88
Weighted average grant date fair value per options and warrants issued	$0.23 per option for 1,499,000 options	$0.30 per option for 990,000 options

Stock option activity during the nine months ended September 30, 2012 is as follows:

Stock option activity for employees:

	Number of Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term(Years)	Aggregate Intrinsic Value
Outstanding January 1, 2012	8,252,480	$ 2.11	5.75	$0
Granted	1,199,000	0.45	9.76	0.35
Forfeited	(10,000)	1.30	1.30	0
Outstanding September 30, 2012	9,441,480	$ 1.90	5.60	$0
Vested and expected to vest September 30, 2012	9,441,480	$ 1.90	5.60	$0
Exercisable September 30, 2012	8,593,690	$ 2.04	5.21	$0

Options to purchase 1,199,000 shares were granted to employees during the nine months ended September 30, 2012.These options were issued at a premium value of 110% of the NYSE MKT stock closing price and vest one year from the issuance date.The weighted average grant-date fair values of the options granted during the nine months ended September 30, 2012 and 2011 were $284,000 and $279,000, respectively.

Unvested stock option activity for employees:

	Number of Options	Weighted Average Exercise Price		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding January 1, 2012	148,333	$0.49		9.52	$0
Granted	809,458	0.44		9.77	0.36
Vested	(100,001)		0.37	8.98	0.43
Forfeited	(10,000)		1.30	5.50	0
Outstanding September 30, 2012	847,790	$ 0.45		9.74	$0.35

Stock option activity for non-employees:

	Number of Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding January 1, 2012	3,128,432	$1.87	5.25	$0
Granted	300,000	0.29	9.75	0.51
Exercised	0	0	0	0
Forfeited	0	0	0	0
Outstanding September 30, 2012	3,428,432	$1.73	4.96	$0
Vested and expected to vest September 30, 2012	3,428,432	$1.73	4.96	$0
Exercisable September 30, 2012	3,100,303	$1.87	4.64	$0

Options to purchase 300,000 shares were granted to non-employees during the nine months ended September 30, 2012.These options were issued at a premium value of 110% of the NYSE MKT stock closing price and vest one year from the issuance date. The weighted-average grant-date fair value of non-employee options granted during the nine months ended September 30, 2012 and 2011 was approximately $60,000 and $17,000, respectively.

Unvested stock option activity for non-employees during the year:

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding January 1, 2012	256,250	$0.71		8.55	$    0
Options granted	300,000	0.29		9.75	0.51
Options vested	(228,121)		0.57	7.98	0.23
Options forfeited	0	0		0	0
Outstanding September 30, 2012	328,129	$0.43		9.68	$0.34

The impact on the Company's results of operations of recording equity-based compensation for the nine months ended September 30, 2012 and 2011 was to increase general and administrative expenses by approximately $195,000 and $348,000 respectively.The impact on basic and fully diluted earnings per share for the nine months ended September 30, 2012 and 2011 was $0.00 and $0.00, respectively.

As of September 30, 2012 and 2011, respectively, there was $308,000 and $120,000 of unrecognized equity-based compensation cost related to options granted under the Equity Incentive Plan.