Note 15 - Stock Option Compensation

3 Months Ended

Mar. 31, 2012

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]

NOTE O – STOCK OPTION COMPENSATION

Compensation expense is calculated each quarter for consultants, employees and directors using the Black-Scholes option pricing model, until the option is fully vested.

Based upon options issued to consultants, we recognized a compensation benefit of $500 in the first quarter of 2012 and we recognized compensation expense of $13,000 in the first quarter of 2011. These amounts are included in research and development expenses.

For the three months ended March 31, 2012, we recognized share-based compensation cost for employees and directors of $311,000, which consisted of $245,000 in general and administrative expenses, and $66,000 in research and development expenses. For the three months ended March 31, 2011, we recognized share-based compensation cost for employees and directors of $596,000, which consisted of $575,000 in general and administrative expenses, and $21,000 in research and development expenses. We did not capitalize any share-based compensation cost.

As of March 31, 2012, there was approximately $1,590,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the stock option plan. That cost is expected to be recognized over a weighted-average period of approximately 1 year.

For the three months ended March 31, 2012 and March 31, 2011, we estimated the fair value of each option award on the date of grant using the Black-Scholes model. We utilized the risk-free interest rate for periods equal to the expected term of the option based upon U.S. Treasury securities in effect at the time of the grant. We have no present intention of declaring any dividends. We based expected volatility on historical volatility. We estimated the expected term of stock options using historical exercise experience.

The following table shows the weighted average assumptions we used to develop the fair value estimates:

	Three Months Ended March 31,
	2012			2011
Expected volatility		61.7	%		58.9	%
Expected dividends		--			--
Expected term (in years)		7.0			6.0
Risk-free rate		1.5	%		2.0	%
Forfeiture rate - employees		25	%		20	%
Forfeiture rate – officers and directors		0	%		0	%

A summary of option activity as of March 31, 2012 and changes during the three months then ended is presented below:

Options	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2012		8,027,950		$	1.09
Granted		2,578,031		$	0.55
Exercised		(42,000	)	$	0.31
Forfeited or Expired		(569,921	)	$	1.91
Outstanding at March 31, 2012		9,994,060		$	0.91		7.0	$	21,000
Exercisable at March 31, 2012		4,287,518		$	1.21		5.6	$	21,000

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2012 and 2011 was $0.34 and $0.67, respectively. The total intrinsic value, which represents the difference between the underlying stock’s market price and the option’s exercise price, of options exercised during the three months ended March 31, 2012 and 2011 was $12,000 and $0, respectively. Cash received from option exercises under all share-based payment arrangements for the three months ended March 31, 2012 and 2011 was $13,000 and $0, respectively, and no tax benefit was realized. There were no options exercised during the first quarter of 2011.

Warrants

At March 31, 2012, there were warrants outstanding to purchase an aggregate of 60,000 shares of common stock at exercise prices ranging from $2.00 to $2.20 per share, with expiration dates ranging from 2012 to 2015.

Restricted Stock Awards

During 2010 and 2011, we granted restricted stock awards to certain officers and other employees, as well as directors, which vest six months to one year from their grant date. We recognized $6,000 and $9,000, respectively, of compensation expense during the three-month periods ended March 31, 2012 and 2011 related to restricted stock awards. Stock compensation expense is recognized over the vesting period of the restricted stock. At March 31, 2012 we had $2,000 of total unrecognized compensation cost related to non-vested restricted stock, all of which will be recognized in April 2012.

	Shares		Weighted Average Grant Date Fair Value
Non-vested balance at January 1, 2012		40,000	$	1.24
Changes during the period:
Shares granted		--		--
Shares vested		--		--
Shares forfeited		--		--
Non-vested balance as of March 31, 2012		40,000	$	1.24