NOTE 10. STOCK COMPENSATION

The following table summarizes share-based compensation expenses relating to shares and options granted and the effect on basic and diluted loss per common share during the three and nine months ended December 31, 2011 and 2010:

The following table breaks out the components of our share-based compensation expenses relating to shares and options granted and the effect on basic and diluted loss per common share during the three and nine months ended December 31, 2011 and 2010.

We did not issue any stock options during the three and nine months ended December 31, 2011. All of the stock-based compensation expense recorded during the nine months ended December 31, 2011 and 2010, which totaled $609,503 and $1,599,915, respectively, is included in payroll and related expense in the accompanying condensed consolidated statements of operations.  Stock-based compensation expense recorded during the three months ended December 31, 2011 had no impact on basic and diluted loss per common share and the stock-based compensation expense recorded during the three months ended December 31, 2010 increased basic and diluted loss per common share by $0.01. Stock-based compensation expense recorded during the nine months ended December 31, 2011 increased basic and diluted loss per common share by $0.01 and the stock-based compensation expense recorded during the nine months ended December 31, 2010 increased basic and diluted loss per common share by $0.02.

We review share-based compensation on a quarterly basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience. The cumulative effect of adjusting the forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments for the nine months ended December 31, 2011 was insignificant.

The expected volatility is based on the historic volatility. The expected life of options granted is based on the "simplified method" as described in the SEC's guidance due to changes in the vesting terms and contractual life of current option grants compared to our historical grants.

Options outstanding that have vested and are expected to vest as of December 31, 2011 are as follows:

At December 31, 2011, there was approximately $969,836 of unrecognized compensation cost related to share-based payments, including the restricted stock grant, which is expected to be recognized over a weighted average period of 1.08 years.

On December 31, 2011, our stock options had a negative intrinsic value since the closing price on that date of $0.05 per share was below the weighted average exercise price of our stock options

In July 2011, our Board ratified a one year consulting agreement with a consultant to provide corporate advisory services. We agreed to pay the consultant a monthly fee of $5,000 in common stock.