Non-Employee Share-Based Compensation

3 Months Ended

Mar. 31, 2012

Non-Employee Share-Based Compensation [Text Block]

Note 5. Non-Employee Share-Based Compensation

Stock Option Plans

At the discretion of management, working with the Compensation Committee, and with approval of the Board of Directors, the Company may grant options to purchase the Company’s common stock to certain individuals from time to time who are not employees of the Company.  These options are granted under the Second Amended and Restated 2007 Equity Incentive Plan of the Company and are granted on the same terms as those being issued to employees.  Stock options granted to non-employees are accounted for using the fair value approach.  The fair value of non-employee option grants are estimated using the Black-Scholes option-pricing model and are remeasured over the vesting term until earned.  The estimated fair value is expensed over the applicable service period.

The following table summarizes the activity of stock options granted to non-employees at March 31, 2012, and changes during the three months then ended:

			Weighted Average
					Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Shares		Price		Term		Value
Outstanding at December 31, 2011		1,097,300	$	1.23
Options Granted		-		-
Options Exercised		-		-
Options Forfeited		-		-
Outstanding at March 31, 2012		1,097,300	$	1.23		6.01	$	47,600
Exercisable at March 31, 2012		822,754	$	1.14		5.33	$	46,219

The aggregate intrinsic values in the table above are before income taxes, based on the Company’s closing stock price of $0.67 on the last day of business for the period ended March 31, 2012.

As of March 31, 2012, there was $5,642 of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted to non-employees. That cost is expected to be recognized over a weighted average period of 0.19 year as of March 31, 2012.

Restricted Stock

Restricted stock awards granted by the Company to non-employees generally have a time vesting condition tied to the respective service agreements.  In addition, there may be other vesting conditions such as achievement of certain performance goals on certain awards.

The restricted stock awards to non-employees are accounted for using the fair value approach.  The fair value of non-employee restricted stock awards at March 31, 2012 was $620,100, which represents the market value of the Company’s common stock on March 31, 2012 less the purchase price.  The fair value is remeasured over the vesting term until vested and the fair value is expensed over the applicable service period.

The following table summarizes activity of restricted stock awards to non-employees at March 31, 2012 and changes during the three months then ended:

			Weighted Average
	Shares		Fair Value
Unvested shares at December 31, 2011		1,170,000	$	0.41
Granted		-		-
Vested		-		-
Forfeited		-		-
Unvested shares at March 31, 2012		1,170,000	$	0.53
Expected to Vest as of March 31, 2012		1,170,000	$	0.53

As of March 31, 2012, there was $217,816 of total unrecognized compensation expense related to restricted stock awards to non-employees.  That cost is expected to be recognized over a period of 0.62 year as of March 31, 2012.

Stock Awards

From time to time, the Company awards the Company’s common stock to non-employees for the services provided.  On March 14, 2012, the Company awarded 80,000 shares of common stock to a consultant for certain investor relations services provided.  The fair value of these awarded shares was estimated at the date of award using the Company’s stock price.  Since these shares are immediately vested, the award is deemed to be fully earned and the full fair value, $56,800, was expensed on the date of award.  On March 27, 2012, the Company awarded 109,557 shares of common stock to a consultant for certain legal services provided. The fair value of these awarded shares was estimated at the date of award using the Company’s stock price.  Since these shares are immediately vested, the award is deemed to be fully earned and the full fair value, $70,116, was expensed on the date of award.

For non-employee share-based compensation, the Company recognized share-based compensation expense of $362,122 in general and administrative expenses in the statement of operations for the three months ended March 31, 2012. The Company recognized $77,972 in share-based compensation expense for the comparable period in 2011.