Note 15 - Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

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

NOTE O – STOCK-BASED COMPENSATION

Compensation expense is calculated using a Black-Scholes option pricing model and is recorded over the vesting period of each award.

Based upon options issued to consultants, we recognized a compensation benefit of $500 in the nine months ended September 30, 2012, which was recorded in the first quarter of 2012.   We recognized a compensation benefit of $4,000 in the three months ended September 30, 2011 and we recognized compensation expense of $1,000 in the nine months ended September 30, 2011 pursuant to options issued to consultants.  These amounts are included in research and development expenses.

For the three months ended September 30, 2012, we recognized share-based compensation cost for employees and directors of $265,000, which consisted of $193,000 in general and administrative expenses and $72,000 in research and development expenses. For the three months ended September 30, 2011, we recognized share-based compensation cost for employees and directors of $260,000, which consisted of $242,000 in general and administrative expenses, and $18,000 in research and development expenses. For the nine months ended September 30, 2012, we recognized share-based compensation cost for employees and directors of $919,000 which consisted of $706,000 in general and administrative expenses, and $213,000 in research and development expenses.  For the nine months ended September 30, 2011, we recognized share-based compensation cost for employees and directors of $758,000, which consisted of $698,000 in general and administrative expenses, and $60,000 in research and development expenses. The share-based compensation expense within general and administrative expenses for the three and nine months ended September 30, 2012 includes charges of $9,000 and $56,000, respectively, related to the modification of stock option awards granted to former employees.  We did not capitalize any share-based compensation cost.

As of September 30, 2012, there was approximately $1,424,000 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 0.7 years.

For the three and nine months ended September 30, 2012 and 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 September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Expected volatility		69.9	%		59.5	%		68.1	%		59.6	%
Expected dividends		--			--			--			--
Expected term (in years)		7.0			6.0			7.0			6.0
Risk-free rate		1.0	%		1.1	%		1.1	%		1.8	%
Forfeiture rate - employees		25	%		20	%		25	%		20	%
Forfeiture rate – officers and directors		0	%		0	%		0	%		0	%

A summary of option activity as of September 30, 2012 and changes during the nine 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		13,944,248	$	0.22
Exercised		(42,000)	$	0.31
Forfeited or Expired		(1,239,154)	$	1.19
Outstanding at September 30, 2012		20,691,044	$	0.50		8.0	$	418,000
Exercisable at September 30, 2012		5,949,031	$	1.09		4.3	$	--

The weighted-average grant-date fair value of options granted during the three months ended September 30, 2012 and 2011 was $0.06 and $0.55, respectively. The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2012 and 2011 was $0.11 and $0.40, 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 September 30, 2012 and 2011 was zero and $198,000, respectively, and the total intrinsic value of options exercised during the nine months ended September 30, 2012 and 2011 was $12,000 and $279,000, respectively.

Cash received from option exercises under all share-based payment arrangements for both the three and nine months ended September 30, 2012 was $13,000 and was $131,000 and $185,000 for the three and nine months ended September 30, 2011, respectively.  No tax benefit was realized from option exercises.

Warrants

At September 30, 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 2012 and 2011, we granted restricted stock awards to directors, which generally vest six months to one year from their grant date. We recognized $2,000 and $12,000 of compensation expense during the three months ended September 30, 2012 and 2011, respectively and $20,000 and $31,000 of compensation expense during the nine months ended September 30, 2012 and 2011, respectively, related to restricted stock awards. Stock compensation expense is recognized over the vesting period of the restricted stock. At September 30, 2012 we had $5,000 of total unrecognized compensation cost related to non-vested restricted stock.

	Shares			Weighted Average Grant Date Fair Value
Non-vested balance at January 1, 2012		40,000		$	1.24
Changes during the period:
Shares granted		40,000			0.43
Shares vested		(60,000	)		0.97
Shares forfeited		--			--
Non-vested balance as of September 30, 2012		20,000		$	0.43