STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure Of Compensation Related Costs, Share-Based Payments [Text Block]

Note 4 Stock-Based Compensation

The Company has a stock incentive plan, as amended (the “Plan”) under which stock options for 10,400,000 shares of the Company’s common stock may be granted. Grants under the Plan may be made to employees (including officers), directors, consultants, advisors or other independent contractors who provide services to the Company or its subsidiary.

During the three and nine months ended September 30, 2012 and 2011, the Company granted stock options to employees and non-employee directors as follows:

	For the three months ended September 30,				For the nine months ended September 30,
	2012		2011		2012		2011
Options granted during period		827,000		82,500		2,136,000		1,100,500
Weighted average exercise price	$	1.14	$	4.39	$	3.26	$	7.09
Weighted average grant date fair value	$	0.81	$	3.03	$	2.21	$	4.71

Each option granted to employees and non-employee directors during the three and nine months ended September 30, 2012 and 2011 vests as to 25% of the shares on each of the first, second, third and fourth anniversary of the vesting commencement date. Following the vesting periods, options are typically exercisable by employees until the earlier of 90 days after the employee’s termination with the Company or the ten-year anniversary of the initial grant, subject to adjustment under certain conditions and at the discretion of the Board of Directors. Following the vesting periods, options are typically exercisable by non-employee directors until the earlier of 180 days after they cease to be a member of the Board of Directors or the ten-year anniversary of the initial grant, subject to adjustment under certain conditions and at the discretion of the Board of Directors. As of January 2012, options that are forfeited or cancelled are not returned to the option pool and are, accordingly, no longer eligible for grant under the Plan. Effective June 5, 2012, the Plan was amended to modify Section 5.2, removing a sentence that could be interpreted as allowing repricing of options issued under the Plan.

The fair value of each option award made to employees and directors was estimated on the date of grant using the Black-Scholes-Merton closed-form option valuation model. The Company utilizes its trading and price history of the Company’s stock in order to determine the expected volatility. The Company plans to continue to analyze the expected stock price volatility, as well as other assumptions utilized in the calculations, at each grant date as more historical data becomes available. Also as of January 1, 2011, taking into consideration hiring completed and planned by the Company and the potential impact of forfeitures given the roles of these newly filled positions, the Company estimated a forfeiture rate of 3%. Given the events during the quarter ended June 30, 2012 and the corporate restructuring announced in July 2012 (see Note 9) that have negatively impacted the Company’s staffing levels, the estimated forfeiture rate was changed to 24% for the first six months of 2012 and the impact of this change in estimate was recognized as a cumulative catch-up and serves to reduce the stock-based compensation costs for the quarter ended June 30, 2012. In July 2012, the Company again reviewed its estimated forfeiture rate, based upon the adjusted staffing levels resulting from the corporate restructuring and, effective at that date, modified its estimated forfeiture rate to 11.5%. The Company intends to continue closely monitoring its estimated forfeiture rate and may be required to make additional adjustments in future periods. Due to the limited amount of historical data available to the Company, particularly with respect to employee exercise patterns and forfeitures, actual results could differ from the Company’s assumptions.

The table below summarizes the assumptions utilized in estimating the fair value of the stock options granted during the three and nine months ended September 30, 2012 and 2011:

	For the three months ended September 30,						For the nine months ended September 30,
	2012			2011			2012			2011
Weighted average risk-free interest rate		0.69	%		1.08	%		0.74	%		1.91	%
Expected life of options		5 years			5 years			5 years			5 years
Expected dividend yield		0	%		0	%		0	%		0	%
Weighted average expected volatility		95.69	%		89.06	%		89.73	%		87.72	%

The table below summarizes the compensation expense recorded by the Company for the three and nine months ended September 30, 2012 and 2011 in conjunction with option grants made to employees and non-employee directors:

	For the three months ended September 30,				For the nine months ended September 30,
	2012		2011		2012		2011
Stock-based compensation expense recorded during period	$	103,712	$	668,147	$	1,385,400	$	2,015,150
Total unrecognized compensation expense remaining	$	4,786,963	$	6,190,954	$	4,786,963	$	6,190,954
Remaining average recognition period (in years)		2.65		2.25		2.65		2.25

As a result of the Company’s restructuring activities, stock-based compensation recorded for the three and nine months ended September 30, 2012 reflects the reversal of stock compensation expense for unvested options that were forfeited during the periods and the impact of option modifications made for former executives and former Board members as a component of their resignations (see Note 9).

The table below summarizes options outstanding, options vested and aggregate intrinsic value as of September 30, 2012:

	As of
	September 30, 2012
Options outstanding under the plan:
Total options outstanding		7,342,830
Weighted average remaining contractual life (in years)		6.52
Weighted average exercise price per share	$	4.13
Aggregate intrinsic value of in-the-money options outstanding	$	181,968
Aggregate intrinsic value of in-the-money options outstanding and vested	$	118,903

The aggregate intrinsic value is calculated as the difference between the exercise prices of the underlying awards and the quoted closing price of the common stock of the Company as of September 30, 2012 and only includes those awards that have an exercise price below the quoted closing price, or in-the-money options.

During the three and nine months ended September 30, 2012 and 2011, no options were exercised. During the three and nine months ended September 30, 2012, unvested options for 519,100 and 605,600 shares, respectively, were forfeited by employees that resigned or were terminated during those periods. During the three and nine months ended September 30, 2011, unvested options for 25,000 shares were forfeited by an employee that resigned during that period.