Note 18. Share–Based Payment Arrangements.

The Company reports share-based compensation arrangements under GAAP primarily using a lattice-based option valuation model to calculate compensation expense over the requisite service period of grants. At December 31, 2011, the Company had three share-based compensation plans, the Equity Incentive Plan (“Equity Plan”), Director Restricted Stock Plan ("Director Plan"), and Advisory and Consulting Plan (“Advisor Plan”) in effect, and Warrants issued during 2007 and 2008 outstanding. Compensation cost charged against income for all compensation and incentive plans for 2011 and 2010 was $1,293,214 and $100,831, respectively.

Equity Incentive Plan

The Company's Equity Plan, which is shareholder-approved, permits the grant of stock awards to eligible participants for up to 10,000,000 shares of common stock. The purpose of the Equity Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward employees, directors and consultants performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The Equity Plan provides financial performance measures upon which specific performance goals would be based and limits on the numbers of shares or compensation that could be made. Option awards are generally granted with an exercise price equal to the market price of the Company's stock at the date of grant. Stock awards may provide for accelerated vesting if there is a change in control. The fair value of each stock option is estimated on the date of grant using a lattice-based valuation model or a straight-line closing price of common stock on the date of grant and spread over the requisite service period. The lattice-based valuation model assumptions noted in the following table are for stock options granted in 2010. The straight-line method was utilized in 2011. Because lattice-based valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on the historical volatility of the Company's common stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from the output of the valuation model and represents the periods that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	2010
Expected Volatility		155.09	%
Weighted-Average Volatility		155.09	%
Expected Dividends		-
Expected Term (in years)		4.77
Risk Free Rate		2.14	%

There were no options granted in 2011, however, there were extensions approved for an aggregate of 1,390,000 previously vested stock options, of which 1,310,000 options were for non-employee directors and 80,000 were for an officer and employee director. For non-employee directors, the Board approved an additional 5-year period on 1,310,000 vested 5-year stock options originally granted on January 16, 2007, at an exercise price of $.60 per share and expiring January 15, 2012. The closing price of the Company's common stock on the date of the aforementioned modification was $.42 per share. For the officer and employee director, the Board approved an additional 3-year period on 80,000 vested 6-year stock options originally granted on July 5, 2005, at an exercise price of $.67 per share and expiring July 12, 2011. The closing price of the Company's common stock on the date of the aforementioned modification was .60 per share. There was no incremental fair value associated with the modifications. See also Note 13 - Related Party Transactions, Items (d) and (e).

As of December 31, 2011, total compensation cost related to non-vested stock options was $291,293, which is expected to be recognized over the 2.0 years after December 31, 2011 (24 months on a weighted-average basis).

Stock option activity under the Company's Equity Plan as of the years ended December 31, is summarized below:

	2011					2010
	Number			Weighted-Average		Number			Weighted-Average
Options	of Options			Exercise Price		of options			Exercise Price
Outstanding-Beginning of Year		6,140,333		$	0.61		7,015,333		$	0.64
Granted		-			-		800,000			0.60
Exercised		-			-		-			-
Canceled, Expired or Forfeited		(192,000	)		0.73		(1,675,000	)		0.74
Outstanding-End of Year		5,948,333			0.61		6,140,333			0.61
Exercisable-End of Year		1,507,597		$	0.57		1,770,208		$	0.57

The weighted-average grant-date fair value of options granted during 2011 and 2010 was $-0- and $.60, respectively. The weighted-average modification-date fair value of vested options extended during 2011 was $.60. There were 4,051,667 options available for grant at December 31, 2011. Refer to Equity Plan and Warrants Summary below for range of exercise prices.

Warrants

The Company did not issue any warrants during 2011 and 2010. During 2007 and 2008, the Company issued an aggregate of 2,500,000 detachable warrants in connection with its mezzanine styled credit instruments, which have been modified and repriced from time to time based on anti-dilution down round price protections. Warrant activity as of the year ended December 31, is summarized below:

	2011				2010
	Number		Weighted-Average		Number		Weighted-Average
Options	of Warrants		Exercise Price		of Warrants		Exercise Price
Outstanding-Beginning of Year		2,500,000	$	0.65		2,500,000	$	0.67
Granted		-		-		-		-
Exercised		-		-		-		-
Canceled, Expired or Forfeited		-		-		-		-
Outstanding-End of Year		2,500,000	$	0.58		2,500,000	$	0.65
Exercisable-End of Year		2,500,000	$	0.58		2,500,000	$	0.65

See Note 8 – Financing Instruments, (b) Warrants, for more information.

Equity Plan and Warrants Summary

The following table summarizes stock options and warrants outstanding at:

		Outstanding						Exercisable				Outstanding						Exercisable
				Weighted										Weighted
				Average		Weighted				Weighted				Average		Weighted				Weighted
Range of		Number		Remaining		Average		Number		Average		Number		Remaining		Average		Number		Average
Exercise		Outstanding		Contractual		Exercise		Exercisable		Exercise		Outstanding		Contractual		Exercise		Exercisable		Exercise
Prices		at 12/31/11		Life (Years)		Price		at 12/31/11		Price		at 12/31/10		Life (Years)		Price		at 12/31/10		Price
$	.36 - $.59		850,000		1.48	$	.36		550,000	$	.36		2,350,000		2.48	$	.51		2,050,000	$	.53
$	.60 - $.64		2,310,000		4.04	$	.60		1,368,765	$	.60		2,327,000		1.37	$	.60		711,200	$	.41
$	.65 - $.80		2,788,333		1.44	$	.69		717,483	$	.68		3,963,333		1.95	$	.70		1,509,008	$	.72

Director Plan

The Company's Board of Directors adopted a Director Plan, which is not shareholder-approved, that permits the grant of up to 800,000 shares of restricted common stock to non-employee directors in 2010. Effective July 1, 2010, the Board granted 800,000 shares of restricted common stock to four non-employee directors, of which 100,000 was granted to Mr. Gregg, Mr. Brown, and Mr. Larson, and 500,000 was granted to Mr. Nadel. All stock grants vest over a four-and-a-half year period, with one-fifth vesting at the end of each year beginning in 2010, for serving on the Board of Directors. The Company does not consider the shares of restricted common stock granted under the Director Plan as outstanding at the time of grant due to vesting restrictions. The shares of restricted common stock when granted are held in reserve by the Company until such time that they are earned and vested, after which the Company issues the vested portion of the shares and delivers them to the respective directors. At December 31, 2011 and 2010, there were 480,000 and 640,000 shares of restricted common stock granted and unvested, respectively. The compensation cost charged against income for the Director Plan in 2011 and 2010 was $104,000 and $104,000, respectively. The fair value of each award was calculated by taking the closing price of the Company's common stock on the effective date of the grant which was $.65 per share, or an aggregate amount of $520,000. The Company is using the straight-line method over the requisite service period for attribution of compensation expense. The expected term of the awards is the last day on which the last increment of stock is scheduled to vest, or December 31, 2015. A summary of awards activity under the Director Plan at December 31, 2011, and changes during the year then ended, are as follows:

	2011						2010
	Number			Weighted-Average			Number			Weighted-Average
Nonvested Awards	of Shares			Grant-Date Fair Value			of Shares			Grant-Date Fair Value
Nonvested - Beginning of Year		640,000		$	416,000			-		$	-
Granted		-			-			800,000			520,000
Vested		(160,000	)		(104,000	)		(160,000	)		(104,000	)
Canceled, Expired or Forfeited		-			-			-			-
Nonvested - End of Year		480,000		$	308,000			640,000		$	416,000

As of December 31, 2011, there is $308,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Director Plan. The cost is expected to be recognized over a weighted-average period of 3 years.

Advisor Plan

During 2011, the Company and a non-employee director entered into an advisory/consultant agreement for 3 years (Advisor Plan”). The Company granted 5,000,000 shares of restricted common stock, which vest monthly over 3 years. The grant-date fair value was calculated by taking the closing price of the Company's common stock of $.57 on the date of grant and multiplying it by the number of shares granted, which equaled $2,850,000. The Advisor Plan includes anti-dilution aspects. An anti-dilution transaction also occurred during 2011, which required the Company to grant and vest an additional 695,704 shares of restricted common stock. The grant-date fair value was calculated by taking the closing price of the Company's common stock of $.33 on the date of grant and multiplying it by the number of anti-dilution shares granted, which equaled $229,582. A summary of awards activity under the Advisor Plan at December 31, 2011, and changes during the year then ended, are as follows:

	2011
	Number			Weighted-Average
Nonvested Awards	of Shares			Grant-Date Fair Value
Nonvested - Beginning of Year		-		$	-
Granted		5,695,704			3,079,582
Vested		(2,123,620	)		(1,043,496	)
Canceled, Expired or Forfeited		-			-
Nonvested - End of Year		3,572,084		$	2,036,086

As of December 31, 2011, there is $2,036,086 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Advisor Plan. The cost is expected to be recognized over a weighted-average period of 2 years. See also Note 13 – Related Party Transactions, Items (a) and (g).