Non-Employee Share-Based Compensation

6 Months Ended

Jun. 30, 2012

Interim Financial Statements

Note 5. Non-Employee Share-Based Compensation [Text Block]

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 June 30, 2012, and changes during the six 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 June 30, 2012		1,097,300	$	1.23		5.76	$	53,200
Exercisable at June 30, 2012		1,077,550	$	1.23		5.74	$	52,013

The aggregate intrinsic values in the table above are before income taxes, based on the Company’s closing stock price of $0.69 on the last day of business for the period ended June 30, 2012.

As of June 30, 2012, there was $2,492 of total unrecognized compensation expense related to unvested share-based compensation arrangements granted to non-employees. That cost is expected to be recognized over a weighted average period of 5.3 months as of June 30, 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 vested non-employee restricted stock awards during the six months ended June 30, 2012 was $302,400, which represents the market value of the Company’s common stock on the vesting date less the purchase price. The fair value of unvested non-employee restricted stock awards at June 30, 2012 was $297,000, which represents the market value of the Company’s common stock on June 30, 2012 less the purchase price. The fair value is remeasured over the vesting term until earned and the fair value is expensed over the applicable service period.

The following table summarizes activity of restricted stock awards to non-employees at June 30, 2012 and changes during the six months then ended:

				Weighted Average
	Shares			Fair Value
Unvested shares at December 31, 2011		1,170,000		$	0.41
Granted		—			—
Vested		(630,000	)		0.48
Forfeited		—			—
Unvested shares at June 30, 2012		540,000		$	0.55
Expected to Vest as of June 30, 2012		540,000		$	0.55

As of June 30, 2012, there was $127,225 of total unrecognized compensation expense related to restricted stock awards to non-employees. That cost is expected to be recognized over a period of 5.3 months as of June 30, 2012.

Stock Awards

From time to time, the Company awards shares of its common stock to non-employees for services provided. The fair values of these awarded shares are estimated on the date of the award using the Company’s stock price. Since these shares are immediately vested, the awards are deemed to be fully earned and the full fair value of each award is expensed on the date the award is granted.

During the six months ended June 30, 2012, the Company awarded an aggregate of 454,557 shares of the Company’s common stock to non-employees. The full fair value the Company recognized as an expense for these awards was $308,176.

For non-employee share-based compensation, the Company recognized share-based compensation expense of $620,700 in general and administrative expenses in the statement of operations for the six months ended June 30, 2012. The Company recognized $175,646 in share-based compensation expense for the comparable period in 2011