STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2013

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 8   STOCK-BASED COMPENSATION

During the nine months ended September 30, 2013, the Company granted stock options to certain employees and directors for an aggregate of 1.7 million shares of common stock at a weighted average exercise price of $2.26 per share.  The options vest equally over a three-year period if the individual remains affiliated with the Company (subject to acceleration of vesting in certain events) and are exercisable for a period of 5 years from the date of issue.  During the same period in 2012, the Company granted 0.3 million of stock options to the Company’s Chief Operating Officer, as part of his employment contract, at an exercise price of $5.80 per share. The options vest equally over a three-year period if the individual remains affiliated with the Company (subject to acceleration of vesting in certain events) and are exercisable for a period of 10 years from the date of issue.

The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model.  During the three and nine months ended September 30, 2013, the Company recorded stock option expense of $0.3 million and $1.0 million, respectively. During the three and nine months ended September 30, 2012, the Company recorded stock option expense of $0.7 million and $2.8 million, respectively.

The principal assumptions used in applying the Black-Scholes option pricing model for the awards for the three and nine months ended September 30, 2013 and 2012 were as follows:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2013	2012	2013	2012
Risk-free interest rate	0.50% to 0.86%	—	0.50%	0.97%
Dividend yield	n/a	—	n/a	n/a
Volatility factor of the expected market price of common stock	66% to 69%	—	66%	75%
Weighted-average expected life of option	3.5 years	—	3.5 years	6.0 years
Weighted-average grant date fair value	$1.02	—	$1.01	$3.80