Stockholders Equity |
9 Months Ended |
|---|---|
Sep. 30, 2011 | |
| Stockholders Equity [Abstract] | |
| STOCKHOLDERS EQUITY |
NOTE 8 — STOCKHOLDERS’ EQUITY Stock Warrants As part of the agreement executed on July 27, 2010 with Cappello Capital Corp, the placement agent in connection with our best efforts offering and the financial advisor in connection with our completed rights offering, we issued warrants to purchase two million shares of our common stock for services performed. The warrants have an exercise price of $1.20 per share. According to the agreement, the warrants vested on October 14, 2010 and are exercisable until its expiration on October 14, 2015. The Company followed the guidance of FASB ASC Topic 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Stock” (“ASC 815-40”), which establishes a framework for determining whether certain freestanding and embedded instruments are indexed to a company’s own stock for purposes of evaluation of the accounting for such instruments under existing accounting literature. Under GAAP, the issuer is required to measure the fair value of the equity instruments in the transaction as of earlier of i) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached or ii) the date at which the counterparty’s performance is complete. The fair value of the warrants at the date of issuance totaling $2.0 million was recorded as a liability and a cost of equity, which was determined by the Black-Scholes option pricing model. The expected stock volatility is based on historical volatility of our common stock over the expected term of the warrants. We used a weighted average expected stock volatility of 111.46%. The expected life assumption is based on the contract term of five years. The dividend yield of zero is based on the fact that we have no present intention to pay cash dividends. The risk free rate of 2.07% used for the warrant is equal to the zero coupon rate in effect at the time of the grant. Upon re-measuring the fair value of the stock warrants at September 30, 2011, compared to $1.6 million at December 31, 2010, the fair value decreased by $854,000, which we have included in other operating expenses for the nine months ended September 30, 2011. We used a weighted average expected stock volatility of 72.08% and a remaining contractual life of 4.0 years based on the contract terms. We also used a dividend yield of zero as we have no present intention to pay cash dividends. The risk free rate of 1.00% used for the warrant is equal to the zero coupon rate in effect at the end of the measurement period.
|