Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 3 - Stock-Based Compensation

For the three and nine months ended September 30, 2013 and 2012, the Company’s condensed consolidated statements of operations reflect stock-based compensation expense for stock options granted under its long-term incentive plans and allocated as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Cost of service revenues	$	12,909	$	18,039	$	38,123	$	44,796
Research and development		12,392		17,110		48,288		59,622
Sales and marketing		2,789		2,851		8,612		7,109
General and administrative		1,487		105,945		174,509		346,236
Total stock-based compensation	$	29,577	$	143,945	$	269,532	$	457,763

Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest over a three or four-year period.

The fair value of stock options granted was determined on the grant date using assumptions for risk free interest rate, the expected term, expected volatility, and expected dividend yield. The risk free interest rate is based on U.S. Treasury zero-coupon yield curve over the expected term of the option. The expected term assumption is determined using the weighted average midpoint between the vesting and expiration term for all individuals within the grant. Through the second quarter of 2012, the Company had estimated its expected volatility from an index of historical stock prices of comparable entities whose share prices were publicly traded and averaged with the Company’s historical stock prices, excluding the first ten months due to the discreet and non-recurring nature of the trading. Beginning in the third quarter of 2012, the Company estimated its expected volatility using only its own historical stock prices, continuing to exclude the first ten months due to the discreet and non-recurring nature of the trading, as management determined this assumption to be a better indicator of value at this time. The Company’s model includes a zero dividend yield assumption, as the Company has not historically paid nor does it anticipate paying dividends on its common stock. The Company’s model does not include a discount for post-vesting restrictions, as the Company has not issued awards with such restrictions. The periodic expense is then determined based on the valuation of the options, and at that time an estimated forfeiture rate is used to reduce the expense recorded. The Company’s estimate of pre-vesting forfeitures is primarily based on the Company’s historical experience and is adjusted to reflect actual forfeitures as the options vest. The estimated forfeiture rates used during the nine months ended September 30, 2013 and 2012 ranged from 7.2% to 7.5%. The following assumptions were used to estimate the fair value of options granted for the nine months ended September 30, 2013 and 2012 using the Black-Scholes option-pricing model:

	September 30,
	2013			2012
Risk free interest rate		1.5	%		1.1	%
Expected term (years)		6.6			6.3
Expected volatility		71.3	%		57.6	%
Expected dividend yield		-			-

A summary of the employee stock option activity for the nine months ended September 30, 2013 is as follows:

					Weighted
					Average
			Weighted		Remaining
	Number of		Average		Contractual
	Shares		Exercise Price		Term
Options outstanding at January 1, 2013		597,504	$	13.03
Granted		1,850		7.15
Exercised		-
Cancelled/Forfeited		(30,070)		14.61
Expired		(14,906)		15.98
Options outstanding at September 30, 2013		554,378		12.84		4.90
Options exercisable at September 30, 2013		484,582		12.89		4.53

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2013 and 2012 was $8,687 and $245,754, respectively.