NOTE 10 - STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2012

Stockholders' Equity Note Disclosure [Text Block]

NOTE 10 – STOCKHOLDERS’ EQUITY

Preferred Stock

Series B Convertible Preferred Stock

In a private placement closed on December 2, 2009, the Company issued an aggregate of 4,166,667 shares of its series B convertible preferred stock, par value $0.001 per share (the “Series B Preferred Stock”), with attached warrants (the “Warrants”) to purchase a total of 1,000,000 shares of its common stock, par value $0.001 per share (the “Common Stock”) to a number of accredited investors (the “Buyers”), in consideration of an aggregate purchase price of $5,000,000 (the “Private Placement”). The Series B Preferred Stock is convertible into 4,166,667 shares of Common Stock.During the year ended December 31, 2012, 47,667 shares of the Series B Preferred stock were converted into 47,667 shares of common stock. At December 31, 2012 and 2011, 4,102,000 and 4,149,667 shares are outstanding respectively.   

The Series B Preferred Stock does not pay annual dividends and shall not have any voting rights except as required by law. In case of the liquidation, the holders of shares of Series B Preferred Stock then outstanding are entitled to receive $1.20 per share (out of available assets) before any distribution or payment can be made to the holders of any junior securities.

Common Stock

At December 31, 2012, the Company has 100,000,000 shares of common stock authorized and 19,522,557 shares issued and outstanding at par value $0.001 per share.

Warrants

The warrants issued in connection with the Series B Preferred Stock Private Placement are exercisable for a period of three years from the date of issuance at an initial exercise price of $2.40.  The Company has the right, on at least ten (10) day written notice, to require that the holders of the warrants exercise the warrants in full and in the event the holders fail to do so, to redeem the outstanding warrants at a price of one cent ($0.01) per share, provided that the market price of the Company’s common stock shall equal or exceed $3.50 on each trading day for the consecutive twenty (20) trading days.

The warrants are equity classified and amounts attributable to the warrants are classified within additional paid-in capital.

The following table summarizes the activities for the warrants for the year ended December 31, 2012:

	Number of			Average
	Shares			Exercise Price
Warrants outstanding, December 31, 2011		1,000,000		$	2.40
Expired		(1,000,000	)	$	2.40
Warrants outstanding, December 31, 2012		-			-

Stock Options

The following table summarizes the activities for the Company’s options for the year ended December 31, 2012:

	Options Outstanding
	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Life (in years)
Balance at December 31, 2011		150,000		$	1.26		1.8
Cancelled		(125,000	)	$	1.47		1.8
Balance at December 31, 2012		25,000		$	0.23		1.5
Vested and exercisable as of December 31, 2012		25,000		$	0.23		1.5

The aggregate intrinsic value, which represents the difference between the price of the Company’s common stock at December 31, 2012 and the related exercise price of the underlying options, was $9,250 for outstanding and exercisable options as of December 31, 2012.

At December 31, 2012, there was no unrecognized compensation cost related to outstanding stock options.

On May 17, 2012, the Company granted 80,000 restricted stock awards (RSAs) to an officer of the Company to replace 125,000 stock options previously granted to this officer. The incremental compensation cost of $7,631 resulting from the replacement of stock options by RSAs will be amortized over the vesting periods of the newly granted RSAs. The incremental compensation cost was measured as the excess of the fair value of the RSAs over the fair value of the options immediately before cancellation based on the share price and other pertinent factors at that date.

Restricted stock awards

The Company has granted RSAs to certain officers of the Company for their services provided to the Company.

The following table summarizes the activities for the Company’s unvested RSAs for the year ended December 31, 2012:

	Number of Shares			Weighted-Average Grant-Date Fair Value per share
Unvested at December 31, 2011		32,500		$	0.84
Granted		80,000		$	0.42
Vested		(72,500	)	$	0.61
Unvested at December 31, 2012		40,000		$	0.42

As of December 31, 2012, there was $3,816 of unrecognized compensation cost related to unvested RSAs. This amount is expected to be recognized over a weighted-average period of 0.3 years.

The Company has granted 202,877 RSAs (both vested and unvested in aggregate). Out of 202,877 granted RSAs, 62,877 and 30,000 shares of restricted stock were issued during the years ended December 31, 2012 and 2011 respectively.

For the years ended December 31, 2012 and 2011, stock-based compensation expense of $54,991 and $107,504 respectively was included in general and administrative expenses.