STOCK PURCHASE WARRANTS

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Note 12. STOCK PURCHASE WARRANTS

Common Stock Warrants

All issuances of common stock warrants during the years ending December 31, 2012 and 2011 were related to equity financing or compensation to non-employees for services.

The following is a summary of all common stock warrant activity during the year ended December 31, 2012:

	Number of Shares		Exercise Price Share		Weighted Average
	Under Warrants		Per Share		Exercise Price
Warrants issued and exercisable at December 31, 2011		4,843,531	$	0.95 - $2.00	$	1.21
Warrants Granted		2,598,531	$	0.50 - $0.95	$	0.85
Warrants Expired		(37,500)	$	2.00	$	2.00
Warrants issued and exercisable at December 31, 2012		7,404,562	$	0.50 - $2.00	$	1.08

During the year ended December 31, 2012, the Company issued an aggregate of 320,000 common stock warrants to non-employees for consulting services.  The fair value of the warrants, determined using a Black-Scholes option pricing model, was approximately $134,000 and is included in professional fees in the accompanying consolidated statements of operations for the year ended December 31, 2012.

In June 2012, the Company exchanged 277,500 common stock options for 277,500 common stock warrants with the same terms resulting in no incremental fair value to be recorded by the Company.

In connection with the 2012 Private Placement, the Company issued 1,819,119 common stock warrants to investors and 181,912 common stock warrants to the placement agent.

The following represents additional information related to common stock warrants outstanding and exercisable at December 31, 2012:

Exercise Price		Number of Shares Under Warrants		Weighted Average Remaining Contract Life in Years		Weighted Average Exercise Price
$	0.50		277,500		1.30	$	0.50
$	0.83		1,041,028		2.65	$	0.83
$	0.84		20,000		3.59	$	0.84
$	0.85		281,912		4.56	$	0.85
$	0.90		1,819,119		0.88	$	0.90
$	0.95		106,250		0.86	$	0.95
$	1.00		426,417		6.35	$	1.00
$	1.33		3,432,336		2.50	$	1.33
			7,404,562		2.36	$	1.08

The Company used the Black-Scholes option price calculation to value the warrants granted in 2012 and 2011 using the following assumptions: risk-free rate of 2.42% and 2.69% to 3.90%, respectively, volatility ranging from 77.70%, to a range of 72.60% to 117%, respectively; actual term and exercise price of warrants granted. See Note 1, Summary of Significant Accounting Policies, “Accounting for Share Based Payments.”