Stock Based Compensation

6 Months Ended

Jun. 30, 2015

E.	Stock-Based Compensation

The Company estimates the fair value of stock options on the grant date using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton option-pricing model requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. There is no expected dividend rate. The fair value of grants was calculated using historical volatility as the Company believes that the historical volatility over the life of the option is indicative of expected volatility in the future. The risk-free interest rate is based on the U.S. Treasury zero-coupon rates with a remaining term equal to the expected term of the option. Accounting Standards Codification ("ASC") 718, Stock Compensation, also requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based upon past history of actual performance, forfeiture rates ranging from zero percent to ten percent have been assumed for options granted. Restricted stock awards are granted at a value equal to the market price of our common stock on the date of the grant.

On May 8, 2015, the Board of Directors granted 37,296 restricted shares of the Company's common stock to Michael J. Ferrantino, Sr., pursuant to the Company's 2011 Incentive Plan. These shares vested in full on the grant date. Total stock-based compensation expense for this grant was $160,000.

On March 12, 2015, the Board of Directors granted a total of 32,000 options to purchase shares of the Company's common stock to members of executive management pursuant to the Company's 2011 Incentive Plan. These stock options have an exercise price of $4.15, a five-year life expiring on March 12, 2020, and vest as follows: 30% on the first anniversary of the grant date; an additional 30% on the second anniversary of the grant date; and the remaining 40% on the third anniversary of the grant date. These stock options have a grant date fair value of $1.03 per option.

Compensation expense related to share-based compensation is recognized over the applicable vesting periods. As of June 30, 2015, there was approximately $73,000 of total unrecognized compensation expense related to unvested share-based compensation arrangements.