STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2013

STOCK-BASED COMPENSATION [Text Block]

10. STOCK-BASED COMPENSATION

Stock Options

The Company has granted incentive and non-qualified stock options to its employees and directors under its 2006 Stock Incentive Plan. The Company has also granted non-qualified, non-plan stock options, which have been authorized by the Company’s board of directors. Stock options are generally granted at an exercise price equal to or greater than the quoted market price on the date of grant.

There are 4,431,744 stock options outstanding at March 31, 2013 issued pursuant to the Company’s 2006 Stock Incentive Plan. The outstanding options expire at various dates from 2013 to 2017. The Company did not grant any stock options during the three month periods ended March 31, 2013 and 2012, respectively. During the three month periods ended March 31, 2013 and 2012, the Company recognized $10,297 and $25,987, respectively, in compensation expense related to employee stock options that vest over time. As summarized in the following tables, during the three month period ended March 31, 2013, there were no stock options granted nor exercised and 6,750 were cancelled or forfeited.

			Weighted
	Number of		Average
	Shares		Exercise Price
Three months ended March 31, 2013
Options outstanding at December 31, 2012	4,438,494	$	0.18
Granted	–		–
Exercised	–		–
Cancelled/Forfeited	(6,750)		0.16
Options outstanding at March 31, 2013	4,431,744	$	0.18

The following table summarizes certain additional information about the Company’s total and exercisable stock options outstanding as of March 31, 2013:

		Weighted
		Average		Weighted
		Remaining		Average
	Number	Contractual		Exercise		Intrinsic
	Outstanding	Life in Years		Price		Value
Total stock options	4,431,744	2.5	$	0.18	$	–
Exercisable stock options	3,619,997	2.4	$	0.19	$	–

The closing price of the Company’s common stock on the OTCQB Market on March 31, 2013 was $.02 per share. Accordingly, there was no intrinsic value of both the total stock options and exercisable stock options as of March 31, 2013.

The following table summarizes the unvested stock options outstanding as of March 31, 2013 :

			Weighted Average
			Grant Date
	Number of Shares		Fair Value
Three months ended March 31, 2013
Unvested options outstanding at December 31, 2012	811,747	$	0.11
Granted	–		–
Vested	–		–
Cancelled/Forfeited	–		–
Unvested Options outstanding at March 31, 2013	811,747	$	0.11

No options vested during the three month period ended March 31, 2013. The Company recognizes stock option compensation expense on stock options with a graded vesting schedule on a straight line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. As of March 31, 2013, 811,747 stock options remain unvested, which will result in $19,452 in compensation expense to be recognized during the next five quarters.

Deferred Stock Units

During the three months ended March 31, 2012, certain equity-based fees have been paid to the Company’s non-executive directors in the form of awards issued pursuant to the Company’s 2006 Stock Incentive Plan. The non-executive directors have limited rights, exercisable within applicable time limits, to elect to have any percentage of such awards, and any percentage of cash fees, payable in deferred stock units. Each of the Company’s non-executive directors exercised such rights in respect of the equity-based fees payable to him for the three months ended March 31, 2012.

During the three months ended March 31, 2012, Douglas Hamilton, the Chairman of the Company’s Audit Committee, received 117,647 deferred stock units; John Cook, the Chairman of the Company’s Compensation Committee, received 95,588 deferred stock units; and Stephen Seymour, the Chairman of the Company’s Corporate Governance and Nominating Committee, received 95,588 deferred stock units.

During the three months ended March 31, 2012, the Company recognized total expense of $26,250 related to the issuance of the total 308,823 deferred stock units to its independent directors. During the three months ended March 31, 2013, 790,721 deferred stock units were converted into shares of the Company’s common stock. As of March 31, 2013, there were 3,592,179 deferred stock units outstanding.