Stock-Based Compensation

6 Months Ended

Jun. 30, 2013

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 2.  Stock-Based Compensation 

The Company records compensation expense for stock options based on the estimated fair value of the options on the date of grant using the BSM model with the assumptions included in the table below. The Company uses historical data among other factors to estimate the expected price volatility, the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option.  The Company calculates expected volatility for stock options and awards using historical volatility as the Company believes the expected volatility will approximate historical volatility.  At September 30, 2013, the Company had two stock-based employee compensation plans. 

During the third quarter of 2013, the Company granted to its Chief Executive Officer and three of its outside directors options to each purchase 50,000 shares of common stock and granted options to purchase 25,000 shares of common stock to the fourth outside director.  The options to the Chief Executive Officer were granted at fair market value and vested immediately.  The options granted to outside directors were priced above fair market value and vested 20% on the grant date, with an additional 20% vesting on the first four anniversaries of the grant date.  All of the stock option grants expire ten years from the date of the grant.  The Company recognized compensation expense of approximately $149,000 during the three months ended September 30, 2013 related to these grants. 

On July 18, 2012, the Company granted each of its four outside directors options to purchase 2,500 shares of common stock, recognizing compensation expense of approximately $6,000 based on the grant date fair value.  There were no stock options exercised during the nine months ended September 30, 2013 and 2012.

The assumptions made in estimating the fair value of the options on the grant date based upon the BSM option-pricing model are as follows:

	Nine Months Ended  September 30
	2013			2012
Dividend yield			0.00%	0.00%
Expected volatility	44.27	-	45.00%	22.98%
Risk free interest rate	1.33	-	1.92%	2.21%
Expected life	5.5	-	6 Years	5 years

A summary of the Company’s stock option plan as of September 30, 2013 and changes during the nine months then ended is listed below:

	Number of Shares	Weighted-Average Exercise Price
Balance at January 1, 2013	21,980	$ 4.16
Granted	225,000	$ 4.57
Exercised	0
Canceled/forfeited/expired	0
Balance at September 30, 2013	246,980	$ 4.54
Vested and exercisable as      of September 30, 2013	106,980	$ 4.35

As of September 30, 2013, there was approximately $218,000 of unrecognized compensation expense.  The Company expects to recognize this expense over the next four years.  There was no intrinsic value in the options outstanding or exercisable as of September 30, 2013 as the prices were greater than the current fair market value as of that date.