Equity

3 Months Ended

Mar. 31, 2012

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 6: Equity

Common Stock

On January 10, 2012, the Company entered into Warrant Amendment Agreements (the “Agreements”) with six individuals who acquired warrants from five funds affiliated with Security Investors, LLC for the purchase of an aggregate of 5,633,344 shares of the Company’s Common Stock (collectively, the “Warrants”). Pursuant to the Agreements, the Company amended the Warrants to change the exercise prices from $0.30 per share to $0.095 per share, and the Investors agreed to exercise all of the Warrants immediately for cash. The Company received proceeds totaling $498,000, net of issuance costs, from the exercise of the Warrants.

On February 10, 2012, the Company issued 419,180 shares of Common Stock to ARC Capital (BVI) Limited. (“ARC”) in partial consideration for financial advisory and other consulting services performed by ARC pursuant to a Financial Advisory and Consulting Agreement dated as of November 7, 2011. The value of this Common Stock was recorded as a component of general and administrative expense on the Company’s Consolidated Statement of Operations in the fourth quarter of 2011.

At March 31, 2012, approximately 231 million shares of Common Stock were reserved for future issuance under convertible debt and warrant agreements, stock option arrangements and other commitments.

Stock Options

During the three-month period ended March 31, 2012, the Board of Directors awarded employees and an advisor to the Board of Directors a total of 1,530,000 stock options under the Company’s 2008 Incentive Stock Plan. The options are exercisable at $0.15 - $0.268 per share for a ten year period. The exercise price was equal to or greater than the market price on the respective grant dates. Options granted to non-employee directors vest on the date of the Company’s 2012 Annual Meeting of Stockholders; options granted to employees vest ratably over a four-year period.

The following table presents option expense included in expenses in the Company’s Consolidated Statements of Operations for the three-month periods ended March 31, 2012 and 2011:

	2012			2011
Cost of revenue	$	4		$	9
General and administrative		137			286
Engineering, research and development		25			30
Sales and marketing		(3	)		29
Option expense before tax		163			354
Benefit for income tax		—			—
Net option expense	$	163		$	354

The fair value of options granted during the three-month periods ended March 31, 2012 and 2011 were estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:

	2012			2011
Risk-free interest rate		1.1% - 1.2	%		3.5	%
Expected option life (years)		6.25			6.25
Expected volatility		92	%		91	%
Expected dividend rate		0	%		0	%
Expected forfeiture rate		20	%		0	%

A summary of the Company’s stock option activity and related information for the three-month periods ended March 31, 2012 and 2011 follows:

	2012					2011
	Number of Shares			Wtd. Avg. Exercise Price per Share		Number of Shares			Wtd. Avg. Exercise Price per Share
Outstanding, beginning of year		19,674,102		$	0.38		22,065,402		$	0.57
Granted		1,530,000		$	0.24		1,200,000		$	0.30
Canceled		(521,250	)	$	0.31		(1,832,500	)	$	1.12
Outstanding, end of period		20,682,852		$	0.37		21,432,902		$	0.51
Exercisable, end of period		9,540,783		$	0.51		9,084,754		$	0.80

The weighted average fair value of options granted was approximately $0.18 and $0.23 per share for the three-month periods ended March 31, 2012 and 2011, respectively. The weighted average fair value of options vested was approximately $141,000 and $221,000 for the three-month periods ended March 31, 2012 and 2011, respectively.

Exercise prices for options outstanding as of March 31, 2012 ranged from $0.15 to $1.50. The weighted average remaining contractual life of those options was approximately 7.7 years at March 31, 2012. The weighted average remaining contractual life of options vested and exercisable was approximately 7.0 years at March 31, 2012.

As of March 31, 2012, there was approximately $879,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s stock option plans. That cost is expected to be recognized over a weighted-average period of 1.1 years. The Company recognizes stock-based compensation on the straight-line method.

Warrants

At March 31, 2012, there were outstanding warrants for the purchase of 78,062,100 shares of the Company’s Common Stock at prices ranging from $0.01 per share to $1.50 per share (weighted average exercise price was $0.40 per share). The expiration date of these warrants are as follows:

Year	Number of Warrants
2012		12,679,487
2013		8,896,554
2014		6,159,436
2015		6,188,879
2016		42,795,244
After 2016		1,342,500
		78,062,100