EQUITY

9 Months Ended

Sep. 30, 2012

EQUITY

EQUITY

9. EQUITY

        In December 2011, the Company issued 379,406 shares of common stock in consideration for the conversion of principal and accrued interest related to convertible notes that were issued pursuant to its 2009 Convertible Debt Offering. In February 2012, the Company recorded a loss on extinguishment of debt of approximately $0.3 million relating to the issuance of an additional 82,647 shares of the Company's common stock in final consideration for this conversion (See Note 6). In the aggregate, these shares were issued at a conversion price of approximately $1.93.

        As part of a restructuring of the board of directors of the Company, five members resigned in February 2012. As a result, the individuals forfeited 93,500 shares of restricted stock, in aggregate.

        As of July 5, 2012, the Board of Directors adopted, subject to stockholder approval at the next stockholder meeting, the 2012 Incentive Plan. If approved by the stockholders, 1,775,000 shares of Common Stock will be available for issuance upon the grant or exercise of awards under the 2012 Incentive Plan. The 2012 Incentive Plan has a ten-year term and provides flexibility to the Executive Compensation Committee to use various equity-based incentive awards, including stock options (both incentive and non-qualified options), stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance shares, dividend equivalent rights and cash-based awards, as compensation tools to motivate the Company's workforce. The maximum number of shares of common stock to be issued under the 2012 Incentive Plan is 1,775,000, plus on January 1, 2013 and each January 1 thereafter, a number of shares of common stock equal to 3 percent of the number of shares of common stock outstanding on the prior December 31. The shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2012 Incentive Plan are added back to the shares of common stock available for issuance under the 2012 Incentive Plan.

        On September 30, 2012, certain employees and directors of the Company voluntarily forfeited an aggregate of 625,000 stock options with a weighted average exercise price of $7.48. In October 2012, the Company issued approximately 38,000 shares of common stock (at a value of $2.00 per share) in an equal exchange for approximately 184,000 common stock warrants. The value of the exchanged warrants was determined using the Black-Scholes pricing model, with an assumed common stock value of $2.00 per share.

        During the nine months ended September 30, 2012, 100,000 stock options nominally priced at $0.02 were exercised for common stock as well as 61,400 stock options at an exercise price of $0.30.