Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

5. Stock-Based Compensation

One employee of the Company exercised 18,750 options at an exercise price of $0.32 per share of common stock for $6,000 and 25,000 options at an exercise price of $0.60 per share of common stock for $15,000 during the three months ended June 30, 2013. One former non-employee member of the board forfeited 25,000 stock options on May 29, 2013. On August 19, 2013, the Company issued 250,000 stock options to its re-elected members of the board. All of the stock options issued in 2013 vest on the date of grant and have an exercise price equal to the fair market price on the date of issuance. On May 14, 2012, the Company issued 50,000 stock options to a newly appointed member of the board. On June 28, 2012, the Company issued 200,000 stock options to its re-elected members of the board. All of the stock options issued in 2012 vest on the date of grant and have an exercise price equal to the fair market price on the date of issuance.

The compensation cost relating to stock options issued in 2013 is measured based on the fair value of the stock options issued. For purposes of estimating the fair value of each stock option on the date of grant, the Company utilized the Black-Scholes option-pricing model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected volatility factor of the market price of the Company’s common stock (as determined by reviewing its historical public market closing prices). Because the Company’s employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee and board member stock options. Included in the results of operations for both the three and nine months ended September 30, 2013 is $142,310 of stock-based compensation expense which relates to the fair value of stock options. Included in the results of operations for the three and nine months ended September 30, 2012 is $0 and $183,028, respectively, of stock-based compensation expense which relates to the fair value of stock options.

The following is a summary of nonvested stock option activity for the nine months ended September 30, 2013:

	Number of Shares			Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2012		—		$	—
Granted		250,000		$	0.57
Vested		(250,000	)	$	0.57
Canceled		—			—
Nonvested at September 30, 2013		—		$	—

As of September 30, 2013, there was no unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan.