Equity

6 Months Ended

Jun. 30, 2013

Stockholders' Equity [Abstract]

Stockholders' Equity

6. Equity

Share-based compensation expense is based on the estimated grant date fair value of the portion of share-based payment awards that are ultimately expected to vest during the period. The grant date fair value of stock-based awards to employees and directors is calculated using the single option valuation approach. Forfeitures of share-based payment awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The estimated average forfeiture rate for the six months ended June 30, 2013 and 2012, was approximately 9.73% and 9.66%, respectively, based on historical data.

Valuation and Expense Information:

The weighted-average fair value of stock-based compensation is based on the single option valuation approach. Forfeitures are estimated and it is assumed no dividends will be declared. The estimated fair value of stock-based compensation awards to employees is amortized using the accrual method over the vesting period of the options. The fair value calculations are based on the following assumptions:

	Six Months Ended June 30, 2013	Six Months Ended June 30, 2012
Risk free interest rate	0.39% - 5.11%	0.62% - 5.11%
Expected life (years)	2.82 - 7.00	2.82 - 7.00
Expected volatility	91.99% - 198.38%	91.99% - 154.08%
Expected dividends	None	None

The Company granted 26,554 stock options during the three and six months ended June 30, 2013. There were no stock options exercised during the three and six months ended June 30, 2013.

The Company granted 1,500 stock options during the three and six months ended June 30, 2012, 153 stock options were exercised and the Company issued 46 restricted shares of Common Stock.

The following table summarizes the allocation of stock-based compensation expense related to stock option grants for the three and six months ended June 30, 2013 and 2012.

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Research and development	$ 49	$ 52	$ 245	$ 121
Sales and marketing	17	24	117	43
General and administrative	100	37	42	87
Director options	10	7	25	16
Stock-based compensation expense	$ 176	$ 120	$ 429	$ 267

A summary of option activity under the Company's plans as of June 30, 2013 and 2012 is as follows:

Options	2013				2012
	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1,	44,529	$ 0.05		$ 2,230	51,353	$ 0.09		$ 4,449
Granted	26,554	$ 0.04		$ 1,188	1,500	$ 0.06		$ 90
Exercised	-	$     -		$ -	(153)	$ 0.06		$ (2)
Forfeited or expired	(610)	$ 0.14		$ (85)	(4,797)	$ 0.34		$ (1,654)
Outstanding at June 30	70,473	$ 0.05	5.51	$ 3,333	47,903	$ 0.06	5.59	$ 2,876
Vested and expected to vest at June 30	63,615	$ 0.05	5.51	$ 3,009	43,276	$ 0.06	5.59	$ 2,598
Exercisable at June 30	33,083	$ 0.05	4.94	$ 1,638	18,649	$ 0.08	5.01	$ 1,531

The following tables summarize significant ranges of outstanding and exercisable options as of June 30, 2013:

Range of Exercise Prices	Options Outstanding			Options Exercisable
	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price	Number Outstanding	Weighted Average Exercise Price
$ 0.02 - $ 0.50	70,435	5.5	$ 0.05	33,045	$ 0.05
0.51 - 1.00	38	0.2	$ 0.75	38	$ 0.75
	70,473	5.5	$ 0.05	33,083	$ 0.05

A summary of the status of the Company's non-vested shares as of June 30, 2013, is as follows:

Non-vested Shares	Shares	Weighted Average Grant-DateFair Value
Non-vested at January 1, 2013	21,210	$ 0.05
Granted	26,554	$ 0.04
Forfeited	(277)	$ 0.03
Vested	(10,098)	$ 0.05
Non-vested at June 30, 2013	37,389	$ 0.05

As of June 30, 2013, there was $534 of total unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the plans. The unrecognized compensation expense is expected to be realized over a weighted average period of 1.3 years.

Preferred Shares

Information with respect to the class of Preferred Stock at June 30, 2013 is as follows:

Class of Preferred Stock	Issue Date	Annual Dividend	Annual Dividend Payable, in Cash or In Kind	Liquidation Preference	Conversion Price	YTD Dividend Shares in Kind	Total Preferred Shares Outstanding	Common Shares to be issued if Fully Converted
Series A-1	May 2008	8%	Quarterly in Arrears	$ 1.00	$ 0.1400	38	991	7,079
Series B	August 2010	10%	Quarterly in Arrears	$ 1.50	$ 0.0433	505	10,564	243,797
Series C	December/March 2011	10%	Quarterly in Arrears	$ 1.50	$ 0.0225	210	4,385	194,889
Series D-1	November 2012/May 2013	10%	Quarterly in Arrears	$ 1.00	$ 0.0225	59	1,413	62,800
Series D-2	November 2012/May 2013	10%	Quarterly in Arrears	$ 1.00	$ 0.0500	177	4,400	88,000

Series A-1 Preferred Stock

In May 2008, the Company issued shares of the Company's Series A Cumulative Convertible Preferred Stock in exchange for certain debt. The Series A Cumulative Convertible Preferred Stock was subsequently exchanged in October 2008 for an equivalent number of shares of Series A-1 Preferred Stock. The shares of Series A-1 Preferred Stock are convertible any time and are subordinate to the Series B, Series C and Series D Preferred Stock.

Series B Preferred Stock

In August 2010, the Company completed the conversion of all of its outstanding indebtedness and issued shares of Series B Preferred Stock in accordance with an executed Exchange Agreement entered into with Phoenix Venture Fund LLC and certain other holders of the Company's indebtedness (the "Recapitalization"). The Company sold additional shares of Series B Preferred Stock for cash (the "Series B Financing") in addition to the conversion of its outstanding debt. The proceeds were used for working capital and general corporate purposes, in each case in the ordinary course of business, and to pay fees and expenses associated with the Recapitalization and Series B Financing. The shares of Series B Preferred Stock are convertible at any time and are subordinate to the Series C and Series D Preferred Stock.

Series C Preferred Stock

In December 2010, the Company completed the sale of shares of Series C Preferred Stock through a Securities Purchase Agreement with Phoenix Venture Fund LLC and certain other investors. The proceeds were used for working capital and general corporate purposes, in each case in the ordinary course of business, and to pay fees and expenses associated with the sale of the Series C Preferred Stock. The shares of Series C Preferred Stock are convertible into Common Stock at any time and are subordinate to the Series D Preferred Stock.

In March 2011, the Company issued shares of its Series C Preferred Stock and warrants to purchase shares of Common Stock to its President as part of a professional services agreement. In addition the Company sold additional shares of Series C Preferred Stock for cash.

In March 2012, the Company issued 278 shares of Series C Preferred Stock valued at $417 in settlement of an indemnification claim brought by Phoenix Venture Fund LLC, resulting from the settlement of a 16b claim in January 2012 brought by a Company stockholder against Phoenix Venture Fund LLC, certain affiliates and the Company, as a nominal defendant. The Company booked a $418 accretion amount for the beneficial conversion feature on the 278 shares of Series C Preferred Stock.

Series D Preferred Stock

In November 2012, stockholders approved an increase in the Company's authorized capital and the issuance of Series D-1 and Series D-2 Convertible Preferred Stock.

In May 2013, the Company completed a private placement of 230 units of Series D Preferred Stock consisting of one (1) share of Series D-1 Preferred Stock and four (4) shares of Series D-2 Preferred Stock. The Series D-1 Preferred Stock can convert to Common Stock at a price of $0.0225 per share, and the Series D-2 Preferred Stock can convert to Common Stock at a price of $0.05 per share. The private placement provided $1,150 in proceeds to the Company. The proceeds are being used for general working capital purposes and to repay a bridge loan that was secured in April 2013 from Phoenix Banner Holdings LLC in the amount of $250 plus $2 in accrued interest.

In November 2012, the Company converted approximately $3,099 of short-term debt and accrued interest into shares of Series D Preferred Stock net of offering costs of $190. The Company sold, for cash in a private placement, 1,082 of additional shares of Series D-2 Preferred Stock at a purchase price of $1.00 per share and received $967 net of offering costs of $115. The material terms of the Series D-1 and Series D-2 Preferred Stock, other than the initial conversion price, are essentially the same. The shares of Series D Preferred Stock are convertible at any time and rank senior to the Company's outstanding shares of Series A-1, Series B and Series C Preferred Stock, and of Common Stock with respect to dividend rights and liquidation preferences.

Preferred Stock Voting and Other Rights

Generally, the Company's Preferred Stock votes together on an as converted basis with the holders of Common Stock. In addition, the Company's Preferred Stock enjoys certain protective provisions, a liquidation preference and anti-dilution protection that are similar to one another.

Warrants

Series C Preferred Stock Warrants

Each investor who purchased shares of Series C Preferred Stock in the financing transactions which closed on December 31, 2010 and March 31, 2011 received a warrant to purchase a number of shares of Common Stock equal to the aggregate number of shares of Series C Preferred Stock purchased by the investor divided by 0.0225. Each warrant issued in connection with the Series C Financing has an exercise price of $0.0225 per share and is exercisable in whole or in part, including by means of cashless exercise, for a period of three years from the date of issuance. In February and March 2012, 28,678 warrants were exercised by holders of the Series C Preferred Stock warrants. Of these warrants exercised, 6,222 were exercised for cash for which the Company received $140 and 22,456 were exercised on a cashless basis. The Company issued 23,928 shares of Common Stock related to these exercises. If the remaining outstanding Series C Warrants are exercised in their entirety, the Company would issue 107,623 shares of Common Stock.

Other Warrants

In January 2013, 1,300 warrants were exercised for cash. In February and March 2012, 6,484 warrants were exercised by the holders of the warrants other than the Series C Preferred Stock warrants described above. At June 30, 2013, 27,736 shares of Common Stock were reserved for issuance upon exercise of outstanding warrants, in addition to the 107,623 shares of Common Stock issuable upon exercise of the Series C Warrants described above.

A summary of the warrant activity is as follows:

	June 30, 2013		December 31, 2012
	Warrants	Weighted Average Exercise Price	Warrants	Weighted Average Exercise Price
Outstanding at beginning of period	151,722	$ 0.0269	182,644	$ 0.0261
Issued	-	-	8,643	$ 0.0500
Exercised	(1,300)	$ 0.0225	(35,162)	$ 0.0264
Expired	(15,063)	$ 0.0343	(4,403)	-
Outstanding at end of period	135,359	$ 0.0252	151,722	$ 0.0269
Exercisable at end of period	135,359	$ 0.0252	151,722	$ 0.0269

A summary of the status of the warrants outstanding and exercisable as of June 30, 2013, is as follows:

Number of Warrants	Weighted Average Remaining Life	Weighted Average Exercise Price per share
6,024	0.14	$ 0.0433
120,691	0.64	$ 0.0225
8,643	2.11	$ 0.0500
135,359	0.71	$ 0.0252