STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2012

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

NOTE 10 - STOCKHOLDERS' EQUITY

Preferred and Common Stock

The total number of authorized shares is 95,000,000 shares of common stock and 5,000,000 shares of preferred stock. The preferred stock may be issued in series with such designations, preferences, stated values, rights, qualifications or limitations as determined solely by the Company’s board of directors.

Warrants

As of September 30, 2012, the Company had warrants outstanding and exercisable to purchase an aggregate of 150,000 shares of the Company's common stock at exercise prices ranging from $3.00 to $3.80 per share, which expire May 16, 2013. At September 30, 2012, the warrants had a weighted-average exercise price of $3.40 per share, a weighted-average remaining contractual life of 0.6 years and a total intrinsic value of $0.

Stock and Stock Options

2009 Stock Option Plan

On September 2, 2009, the Company’s Board of Directors adopted, and on September 3, 2009 its stockholders approved, the 2009 Stock Option Plan of the Company (the “2009 Option Plan”), which gave the Company the ability to grant stock options and restricted stock to its employees or consultants, or employees or consultants of its subsidiaries and to the non-employee members of its Board of Directors or the board of directors of any of its subsidiaries. The 2009 Option Plan allowed for awards of stock options and restricted stock for up to 1,000,000 shares of common stock. In connection with the adoption of the 2010 Incentive Plan, as defined below, at the end of 2010, the Company’s Board of Directors determined that no additional awards of stock options or restricted stock would be made under the 2009 Option Plan, and that the 2009 Option Plan would be terminated following the exercise or expiration of all stock options outstanding under such plan.  As of September 30, 2012, options to purchase an aggregate of 300,000 shares of common stock had been granted under the 2009 Option Plan, of which 40,000 had been exercised and 260,000 had either expired, forfeited or were cancelled.  As such, there were no securities outstanding under the 2009 Plan as of April 2012.  Accordingly, the 2009 plan has been cancelled.

2010 Incentive Plan

On November 12, 2010, the Company’s Board of Directors adopted, and on December 22, 2010 its stockholders approved, the 2010 Long-Term Incentive Plan  (the “2010 Incentive Plan”), which gave the Company the ability to grant stock options, restricted stock, stock appreciation rights and performance units to its employees, directors and consultants, or those who will become employees, directors and consultants of the Company and/or its subsidiaries. The 2010 Incentive Plan currently allows for equity awards of up to 4,000,000 shares of common stock. Through September 30, 2012, 125,000 shares of common stock and options to purchase an aggregate of 100,000 shares of stock options had been granted under the 2010 Incentive Plan.

Effective April 28, 2012, the Company and Frank Waung, its Chief Financial Officer at the time, entered into Amendment Agreement to Non-Qualified Stock Option Agreements to amend the terms of the equity award previously granted to Mr. Waung under the 2009 Option Plan and 2010 Incentive Plan in conjunction with the termination of his employment agreement with the Company effective April 29, 2012.  The effect of the amendment was to terminate a total of 185,000 vested but unexercised options immediately on April 28, 2012 as opposed to 90 days after the employment termination date.   Effective the same date, the Company granted 100,000 shares of common stock to Mr. Waung under the 2010 Incentive Plan.

Accordingly, the Company recorded a total of $55,775 of stock compensation expense based upon the excess of the fair value of the common stock issued in exchange for the options that were cancelled, i.e., 185,000 options with a fair value of $225 in exchange for 100,000 shares of common stock with a fair value of $56,000 based on the closing market price of our common stock of $0.56 on the date of grant.  The fair value of the stock options was computed using the Black-Scholes Option Pricing Model, using the following assumptions: risk free interest rate of 0.14%-0.19%, expected dividend yield of 0%, expected volatility of 66.7% and an expected life of 0.5- 1.1 years.

In addition, on April 28, 2012 a total of 25,000 options to purchase common stock granted under the 2010 Incentive Plan with an exercise price of $2.54 per share were forfeited and 50,000 shares of common stock granted under the 2010 Incentive Plan failed to vest and were forfeited.

During the nine months ended September 30, 2012 and 2011, the Company recognized $141,721 and $139,075, respectively of compensation expense as general and administrative expenses related to stock and stock options granted.

At September 30, 2012, the total remaining unrecognized compensation expense related to stock options was $0, the aggregate intrinsic value of outstanding stock options was $0 and the total remaining unrecognized compensation expense related to restrictive stock grants was $0.