Capital Stock

12 Months Ended

Dec. 31, 2011

Capital Stock [Abstract]

Capital Stock

13. CAPITAL STOCK

Our authorized capital stock consists of 40,000,000 common shares, no par value per share, of which 18,710,002 were outstanding as of December 31, 2011, 17,513,608 shares were outstanding as of December 31, 2010 and 17,200,442 shares were outstanding as of December 31, 2009; 2,000,000 preferred shares, none of which were issued or outstanding at December 31, 2011, 2010 and 2009 and 1,416,664 shares of 8.5% non-voting cumulative redeemable Series A Preferred Shares, $1.00 par value, of which none were outstanding at December 31, 2011, 2010 and 2009.

During 2011, we issued 397,054 common shares upon the exercise of 416,021 stock options by employees and realized proceeds of $719,484. The weighted average exercise price of options exercised was $1.81.

In 2011, we issued 799,340 common shares upon the exercise of outstanding warrants and realized $3,877,276 in proceeds.

During 2010, we issued 78,166 common shares upon the exercise of stock options by employees and realized proceeds of $90,448. The weighted average exercise price of options exercised was $1.16. The Board of Directors approved restricted stock grants totaling 235,000 shares in 2010.

During 2009, we also issued 3,095,752 common shares and 1,204,400 common share purchase warrants and realized net cash proceeds of $20,651,000. This total includes 2,840,000 common shares issued pursuant to a registered direct offering in October 2009 to institutional investors for which we received gross proceeds of $22,000,000 and net proceeds of $20,388,000 after deducting investment banking fees, legal, registration, accounting and other expenses related to this offering. This registered direct offering consisted of a unit priced at $7.75, which included one common share and a warrant to purchase .38 common shares per unit at an exercise price of $9.55 per share. For financial reporting purposes, the net proceeds were allocated between common stock and warrants on a relative fair value basis.

During 2009, we issued 255,752 common shares upon the exercise of 333,198 stock options by employees and realized proceeds of $262,654. The weighted average exercise price of options exercised was $2.14.

Common Shares

Holders of the common shares are entitled to one vote per share on all matters submitted to a vote of our shareholders and are to receive dividends when and if declared by the Board of Directors. The Board is authorized to issue additional common shares within the limits of the Company’s Articles of Incorporation without further shareholder action, subject to applicable stock exchange rules.

Warrants

We had 2,607,440 common share purchase warrants outstanding at December 31, 2011 of which 2,507,440 were exercisable as of December 31, 2011. During 2011, we issued 100,000 warrants with an exercise price of $10.25 related to a supply agreement with a major customer and we recognized a reduction in revenue of $134,501 in 2011 related to those warrants. Those warrants are exercisable after December 31, 2013 and expire March 31, 2014. Also, during 2011, we agreed to extend the term of 245,000 warrants issued in November 2008 in consideration for services. The term was extended from November 5, 2011 to May 4, 2012 and 200,000 remained outstanding as of December 31, 2011. We recognized an expense of $165,850 related to the extension of the term of these warrants.

We had 3,338,569 common share purchase warrants outstanding at December 31, 2010 of which 3,318,569 were exercisable as of December 31, 2010. During 2010, we issued 5,000 warrants with an exercise price of $8.00 in exchange for services and incurred an expense of $4,000 in 2010. These warrants are exercisable on or after September 1, 2011 and expire on May 28, 2013. Also, pursuant to an agreement executed on March 8, 2010, we issued 15,000 warrants in exchange for services and incurred an expense of $46,600 in 2010 related to these warrants. These warrants are exercisable on or after March 8, 2011, have an exercise price of $6.14 and expire on March 8, 2013. Also during 2010, we agreed to extend the term and revise the exercise price of 100,000 warrants, issued in May 2008, in consideration for services. The exercise price of these warrants was lowered to $8.00 from $9.00 and their term extended by one year to May 28, 2013. We recognized an expense of $102,000 in 2010 related to the change in terms in for these warrants.

We had 3,318,569 common share purchase warrants outstanding at December 31, 2009 of which 1,694,169 were exercisable as of December 31, 2009. During 2009, we issued 1,164,400 warrants pertaining to our registered direct offering, consisting of 1,079,200 warrants exercisable at $9.55 with a five year term and 85,200 warrants exercisable at $9.55 with a three year term. In addition, pursuant to an agreement executed in September 2008, 40,000 warrants issued in exchange for services were earned. These warrants have an exercise price of $6.50 and expire on September 30, 2012.

Warrants were valued using the Black Scholes model. The net proceeds from our 2009 registered direct offering and the private placement of our common shares and common share purchase warrants in 2007 described above were prorated between the fair market value of our common shares issued and the Black Scholes valuation of the warrants. In 2011, 2010 and 2009 we recognized $312,000, $640,000 and $403,000 in expense related to services and consideration provided in exchange for warrants. At December 31, 2011, the amount of unrecorded expense for warrants attributable to future periods was approximately $309,000 which is expected to be amortized to expense on a straight line basis through 2013.

Outstanding warrants by exercise price consisted of the following as of December 31, 2011, 2010 and 2009:

Exercise Price	Expiration Date		2011		2010		2009
$9.55		10/5/2014		883,071		1,079,200		1,079,200
$7.18		11/28/2012		1,079,169		1,079,169		1,079,169
$1.99		11/5/2011		—		300,000		300,000
$4.54		11/5/2011		—		200,000		200,000
$7.00		5/4/2012		200,000		200,000		200,000
$10.25		3/31/2014		100,000		—		—
$9.00		5/28/2012		—		—		100,000
$8.00		5/28/2013		105,000		105,000		—
$7.00		10/3/2011		—		90,000		90,000
$9.55		10/5/2012		85,200		85,200		85,200
$10.00		11/28/2012		80,000		80,000		80,000
$7.50		10/3/2011		—		45,000		45,000
$6.14		3/8/2013		15,000		15,000		—
$6.50		9/30/2012		60,000		60,000		60,000
Total				2,607,440		3,338,569		3,318,569