Note 10. Stock-based Comensation

6 Months Ended

Jun. 30, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

10. STOCK-BASED COMPENSATION

Share Option Plan

The Company sponsors a Share Option Plan under which a maximum fixed reloading percentage of 10% of the issued and outstanding common stock of the Company may be granted to employees, directors, and service providers.  In general, options granted under the plan begin to vest after one year from the date of the grant, are exercisable in equal amounts over four years on the anniversary date of the grant, and expire eight years following the date of grant.  As of June 30, 2011, the maximum number of shares of common stock reserved for issuance under the Share Option Plan was 4,164,139, and 2,101,789 shares of common stock remained available for future grant under the Share Option Plan.

The Company granted 11,500 and 42,500 stock options during the three months ended June 30, 2011 and 2010, respectively, and 5,833 and zero stock options were exercised during the three months ended June 30, 2011 and 2010, respectively.   The Company granted 19,250 and 42,500 stock options during the six months ended June 30, 2011 and 2010, respectively, and 12,708 and zero stock options were exercised during the six months ended June 30, 2011 and 2010, respectively.  The Company recorded stock compensation expense of $257,542 and $235,388 during the three months ended June 30, 2011 and 2010, respectively and $541,538 and $460,935 during the six months ended June 30, 2011 and 2010, respectively.  The Company uses the Black-Scholes option pricing model to value the options at each grant date, using the following weighted average assumptions:

	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010
Weighted average grant-date fair value for stock options granted	$	4.14		$	2.80		$	3.35		$	2.80
Expected dividend rate		0.00	%		0.00	%		0.00	%		0.00	%
Expected volatility		82.03	%		90.61	%		82.16	%		90.61	%
Risk-free interest rate		2.07	%		2.60	%		2.17	%		2.60	%
Expected life of options in years		6			6			6			6

The expected life of options in years is determined utilizing the “simplified” method, which calculates the expected life as the average of the vesting term and the contractual term of the option.

Employee Stock Purchase Plan

The Company adopted an Employee Stock Purchase Plan (“ESPP”) on June 3, 2010, pursuant to which a total of 900,000 shares of common stock were reserved for sale to employees of the Company.  The ESPP is administered by the compensation committee of the board of directors and is open to all eligible employees of the Company.  Under the terms of the ESPP, eligible employees may purchase shares of the Company’s common stock at six month intervals during 18-month offering periods through their periodic payroll deductions, which may not exceed 15% of any employee’s compensation and may not exceed a value of $25,000 in any calendar year, at a price not less than the lesser of an amount equal to 85% of the fair market value of the Company’s common stock at the beginning of the offering period or an amount equal to 85% of the fair market value of the Company’s common stock on each purchase date.  The maximum aggregate number of shares that may be purchased by each eligible employee during each offering period is 15,000 shares of the Company’s common stock.  For the three and six months ended June 30, 2011, expense related to this plan was $19,474 and $ 49,321, respectively.  For the three and six months ended June 30, 2010 expense related to this plan was not material.   Under the ESPP, the Company issued 31,753 shares to employees during the three and six months ended June 30, 2011.  There are 847,813 shares reserved for future issuances under the ESPP as of June 30, 2011.

Restricted Share Unit Plan

The Company also sponsors a Restricted Share Unit Plan (the “RSU Plan”) for non-employee directors that was established in 2005.  The RSU Plan provides for grants to be made from time to time by the board of directors or a committee thereof.  Each grant will be made in accordance with the RSU Plan and terms specific to that grant and will be converted into one share of common stock at the end of the grant period (not to exceed five years) without any further consideration payable to the Company in respect thereof.  As of June 30, 2011, maximum number of common shares of the Company reserved for issuance pursuant to the RSU Plan was 466,666.  As of June 30, 2011, 197,651 shares of common stock remain available for future grant under the RSU Plan.  The Company granted 22,690 and 40,430 restricted share units, both with a fair value of $150,000 during each of the three-month and six-month periods ended June 30, 2011 and 2010, respectively.  8,304 shares had been issued upon conversion of RSUs for the three and six months ended June 30, 2011.  No shares were issued upon conversion of RSUs for the three and six months ended June 30, 2010.  The fair value of the restricted share units has been determined to be the equivalent of the Company’s common shares closing trading price on the date of grant as quoted in NASDAQ Global Market.