17.

Share-based compensation expenses

2008 Omnibus Incentive Plan

The 2008 Omnibus Incentive Plan (the "2008 Plan") was approved by the Company's Board of Directors on October 30, 2008 and became effective upon the approval of the Company's stockholders on December 11, 2008. The 2008 Plan has a ten-year term. The 2008 Plan reserves two million shares of common stock for issuance, subject to increase from time to time by the number of shares: (i) subject to outstanding awards granted under the Company's prior equity compensation plans that terminate without delivery of any stock (to the extent such shares would have been available for issuance under such prior plan), and (ii) subject to awards assumed or substituted in connection with the acquisition of another company.

The 2008 Plan authorizes the issuance of awards including stock options, restricted stock units (RSUs), restricted stock, unrestricted stock, stock appreciation rights (SARs) and other equity and/or cash performance incentive awards to employees, directors, and consultants of the Company. Subject to certain restrictions, the Compensation Committee of the Board of Directors has broad discretion to establish the terms and conditions for awards under the 2008 Plan, including the number of shares, vesting conditions and the required service or performance criteria. Options and SARs have a contractual term of ten years and generally vest over four to five years with an exercise price equal to the fair value on the date of grant. Incentive stock options (ISOs) granted must have an exercise price equal to the fair market value on the date of grant. Repricing of stock options and SARs is prohibited without stockholder approval. Certain change in control transactions may cause awards granted under the 2008 Plan to vest, unless the awards are continued or substituted for in connection with the transaction. At September 30, 2012, approximately 1,303,000 shares of the Company's common stock remained available for issuance under the 2008 Plan.

Share-based compensation related to employees

	Number			Weighted Average Exercise		Contractual Term in
	of Share			Price		Years

Outstanding, January 1, 2012		630,000		$	3.04		9.23

Granted		100,000		$	1.15
Exercised		-			-
Forfeited		(65,000	)	$	2.51

Outstanding, September 30, 2012		665,000		$	2.81		8.60

Exercisable, September 30, 2012		120,000		$	3.48		8.32

During the nine months ended September 30, 2012, the Company granted 100,000 shares to one employee at an exercise price of $1.15 per share. During the nine months ended September 30, 2012, a total of 65,000 options were forfeited in accordance with the terms and conditions of the 2008 Plan.

There were no options granted to employees during the three months ended September 30, 2012. The weighted-average fair value of options granted to employees for the nine month periods ended September 30, 2012 and 2011 were $0.74 per share and $1.47 per share, respectively, and were calculated using the Black-Scholes pricing model, with the following weighted-average assumptions:

	Three months ended September 30,					Nine months ended September 30,
	2012		2011			2012			2011

Expected volatility		-		40.14	%		71.78	%		40.02	%

Risk-free interest rate		-		1.12	%		1.09	%		2.42	%

Expected term from grant date (in years)		-		6.25			6.25			6.16
Dividend rate		-		-			-			-

Forfeiture rate		-		-			4.86	%		4.30	%

Fair value		-	$	0.52			0.74		$	1.47

The estimated fair value of share-based compensation to employees is recognized as a charge against income on a ratable basis over the requisite service period, which is generally the vesting period of the award.

Total share-based payment expenses

In connection with the grant of stock options to employees and nonemployees, the Company recorded share-based compensation charges of $52,030 and $266, respectively, for the three-month period ended September 30, 2012 and stock-based compensation charges of $335,231 and $(354), respectively, for the three-month period ended September 30, 2011. The Company recorded share-based compensation charges of $144,661 and $798, respectively, for the nine-month period ended September 30, 2012 and stock-based compensation charges of $611,650 and $407, respectively, for the nine-month period ended September 30, 2011.

Expected Term

The expected term of stock options represents the weighted-average period that the stock options are expected to remain outstanding. There have been no stock option exercises to date upon which to base an estimate of the expected term. The Company determined it appropriate to estimate the expected term using the "simplified" method as prescribed by the Securities and Exchange Commission, or SEC, in Staff Accounting Bulletin No. 107, or SAB 107, as amended by SAB 110. The simplified method determines an expected term based on the average of the weighted average vesting term and the contractual term of the option.

Expected Volatility

The Company has limited stock trading history and it is not able to reasonably estimate the fair value of its equity share options because it is not practicable for it to estimate the expected volatility of its share price. The expected volatilities used for the three and nine month periods ended September 30, 2012 and 2011 are based upon the volatilities of a peer group of comparable publicly traded companies. This peer group was selected by the Company using criteria including similar industry, similar stage of development and comparable market capitalization.

Risk-Free Interest Rate

The risk-free interest rate assumption is based on U.S. Treasury instruments with a term consistent with the expected term of the Company's stock options.

Dividend Yield

The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and therefore, used an expected dividend yield of zero in the valuation model.

Forfeitures

The Company estimates forfeitures at the time of grant and revises the estimates in subsequent periods if actual forfeitures differ from what was estimated. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for those awards that are expected to vest. All stock-based payment awards are amortized on a ratable basis over the requisite service periods of the awards, which are generally the vesting periods. The Company records stock-based compensation expense only for those awards that are expected to vest.