Share-based Compensation

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-based Compensation

Note 9 - Share-based Compensation

Options

We have two nonqualified stock option plans approved by shareholders with an aggregate of approximately 2.3 million shares remaining available for grant as of June 30, 2013.  The exercise price of the options are established by the Board of Directors on the date of grant and are generally equal to the market price of the stock on the grant date.  The Board of Directors may determine the vesting period for each new grant. Options issued are exercisable in whole or in part for a period as determined by the Board of Directors of up to ten years from the date of grant.

We estimate the fair value of each option award at the grant date by using the Black-Scholes option pricing model. We did not award any options during the three or six months ended June 30, 2013.

Certain options awarded prior to the year ended December 31, 2012 are amortized over vesting periods encompassing the three months ended March 31, 2013, and consequently we charged to operating expenses $4,733 during the three months ended March 31, 2013 at which time the fair value was fully amortized.

The following table summarizes our stock option activity for the six months ended June 30, 2013:

			Weighted-
	Number		Average
	of Shares		Exercise
	Issuable		Price
Balance, January 1, 2013		5,710,125	$	1.10
Granted		-		-
Exercised		-		-
Expired		(862,076)		*
Balance, June 30, 2013		4,848,049	$	1.29

* less than $0.01 

The following table summarizes options outstanding at June 30, 2013:

			Weighted-		Weighted-
	Number		Average		Average		Aggregate
	of Shares		Exercise		Remaining		Intrinsic
	Issuable		Price		Term (Years)		Value
Exercisable		3,438,049	$	1.11		2.6	$	4,500
Not vested		1,410,000	$	1.77		4.1	$	-
Balance, June 30, 2013:		4,848,049	$	1.29		3.0	$	4,500

Warrants

From time to time, we compensate consultants, advisors and investors with warrants to purchase shares of our common stock, in lieu of cash payments. Net share settlement is available to warrant holders.

The following table sets forth our warrant activity during the six months ended June 30, 2013:

		Weighted-
	Number	Average
	of Shares	Exercise
	Issuable	Price
Balance, January 1, 2013	27,353,151	$	0.76
Granted	4,375,004		0.60
Exercised	-		-
Cancelled	(380,000)		1.78
Balance, June 30, 2013	31,348,155	$	0.73

The following table sets forth the warrants outstanding at June 30, 2013:

			Weighted-
	Number		Average
	of Shares		Exercise
	Issuable		Price
10% convertible debenture - bonus warrants		483,357	$	0.60
10% convertible preferred stock - warrants		3,761,365		1.00
8% convertible promissory notes - warrants		22,195,474		0.60
Consultants		4,907,959		1.12
Total		31,348,155	$	0.73

During the three months ended March 31, 2013, pursuant to our 8% convertible promissory notes, we issued warrants to purchase 4,375,004 shares of our common stock pursuant to our issuance and sale of our 8% convertible promissory notes, at an initial exercise price of $0.60 per share. These warrants had fair values on their dates of issuances of $249,151 which was recorded as a credit to derivative liabilities and a charge to debt discount associated with our 8% convertible promissory notes. See Notes 5 and 6 for further discussion of these warrants. The estimated fair value of the warrants was computed by a third party using Monte Carlo simulation models.

In addition, the fair value of a previously issued warrant which is being amortized over a service period spanning multiple reporting periods, was revalued using the Black-Scholes option pricing model, at the end of each reporting period. During the three and six months ended June 30, 2013, we decreased the fair value by $16,655 and $2,990, respectively and recorded a credit in our statement of operations.