STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 2013

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

NOTE 9. STOCK BASED COMPENSATION

In November 2012, the Board of Directors adopted the 2013 Equity Incentive Plan for the purpose of attracting and retaining the services of key employees, consultants, and non-employee members of the Board of Directors and to provide such persons with a proprietary interest in the Company through the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and/or other awards.

In March 2013, the Company granted to its executive officers, Board of Directors, and certain key employees nonqualified stock options and restricted stock under the 2013 Equity Incentive Plan. Nonqualified stock options to purchase an aggregate 227,000 shares of the Company’s common stock at $0.42 per share were awarded; these options vest ratably over a service period of three years.  A total of 136,200 shares of restricted stock were granted and such awards vest over a three year period.  The total grant date fair value of all of these awards was approximately $101,000.  At June 30, 2013, the unrecognized stock-based compensation expense related to all awards which is expected to be recognized over a weighted average period of 2.0 years is approximately $80,000.

Stock Options

We utilize the Black-Scholes option pricing model to measure the fair value of stock options granted to employees and directors.  For the six months ended June 30, 2013, we recognized approximately $4,000 in stock-based compensation related to stock options.  We did not have any stock-based compensation expense related to stock options for the six months ended June 30, 2012.

The following table summarizes our stock option activity for the six months ended June 30, 2013:

	Number of Shares	Weighted Average Exercise Price Per Share		Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Term
Outstanding, December 31, 2012	—	$	—	$	—
Granted	227,000	$	0.42	$	0.19
Exercised	—	$	—	$	—
Cancelled / Forfeited	—	$	—	$	—
Outstanding, June 30, 2013	227,000	$	0.42	$	0.19	9.7
Options exercisable at June 30, 2013	—	$	—	$	—	—

The following table shows the weighted average assumptions used in the Black-Scholes calculation of the fair value of the stock option grants for the six months ended June 30, 2013:

Expected dividend yield	0.0%
Volatility	47.3%
Risk free interest rate	1.3%
Expected life	6.0 Years

Restricted stock

Restricted stock awards are awards of common stock that are subject the restrictions on transfer and to a risk of forfeiture if the awardee terminates employment with the Company prior to the lapse of the restrictions.  The fair value of such stock was determined using the closing price on the grant date and compensation expense is recorded over the applicable vesting periods.  For the three months ended June 30, 2013, we did not recognize any compensation expense due to the reversal of compensation expense related to the forfeiture of 50,000 shares of restricted stock previously granted. For the six months ended June 30, 2013, we recognized approximately $42,000 of stock-based compensation expense.  For the three and six months ended June 30, 2012, we recognized approximately $17,000 and $67,000, respectively, in stock-based compensation related to restricted stock awards.  The following table summarizes our restricted stock activity for the six months ended June 30, 2013:

	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested, December 31, 2012	116,666		$	0.48
Granted	136,200		$	0.42
Vested	(103,733	)	$	0.55
Forfeited	(50,000	)	$	—
Unvested, June 30, 2013	99,133		$	0.44