Employee Stock Benefit Plans

6 Months Ended

Jun. 30, 2013

Employee Stock Benefit Plans [Abstract]

Employee Stock Benefit Plans

Note 9

Employee Stock Benefit Plans:

Post-Reverse Merger

Following the closing of the reverse acquisition, the previous Non-Employee Director Stock Option Plan of PhotoMedex (the acquired entity) was adopted by the group. This plan has authorized 120,000 shares; of which 7,000 shares had been issued or were reserved for issuance as awards of shares of common stock, and 17,285 shares were reserved for outstanding stock options.

In addition, following the closing of the reverse acquisition, the previous 2005 Equity Compensation Plan (“2005 Equity Plan”) of Pre-merged PhotoMedex (the acquired entity) was also adopted for use by the group. The 2005 Equity Plan has authorized 3,000,000 shares, of which 753,095 shares had been issued or were reserved for issuance as awards of shares of common stock, and 1,114,714 shares were reserved for outstanding options.

Stock option activity under all of the Company’s share-based compensation plans for the six months ended June 30, 2013 was as follows:

	Number of Options	Weighted Average Exercise Price
Outstanding, January 1, 2013	898,541	$16.65
Granted	259,625	16.59
Exercised	(3,750)	6.24
Cancelled	(17,166)	25.5
Outstanding, June 30, 2013	1,137,250	$16.62
Options exercisable at June 30, 2013	324,625	$17.72

At June 30, 2013, there was $10,903 of total unrecognized compensation cost related to non-vested option grants and stock awards that is expected to be recognized over a weighted-average period of 3.5 years. The intrinsic value of options outstanding and exercisable at June 30, 2013 was not significant.

The Company calculates expected volatility for a share-based grants based on historic daily stock price observations of its common stock. For estimating the expected term of share-based grants made in the six months ended June 30, 2013, the Company has adopted the simplified method. The Company has used historical data to estimate expected employee behaviors related to option exercises and forfeitures and included these expected forfeitures as a part of the estimate of expense as of the grant date.

The Company uses the Black-Scholes option-pricing model to estimate fair value of grants of stock options with the following weighted-average assumptions:

	Six Months Ended June 30, 2013
Risk-free interest rate	1.26%
Volatility	85.25%
Expected dividend yield	0%
Expected life	5.5 years
Estimated forfeiture rate	0%

With respect to grants of options, the risk-free rate of interest is based on the U.S. Treasury rates appropriate for the expected term of the grant or award.

On February 28, 2013, the Company granted an aggregate of 177,125 options to purchase common stock to a number of employees and consultants with a strike price of $15, which was higher than the quoted market value of our stock at the date of grants. The options vest over five years and expire ten years from the date of grant. Also on February 28, 2013, the Company granted an aggregate of 82,500 non-qualified options to purchase common stock to two executive employees with a strike price of $20, which was set to match the exercise price of the warrants issued in the reverse merger and was higher than the quoted market value of our stock at the date of grant. The aggregate fair value of the options granted was $2,590. The options vest over five years and expire ten years from the date of grant.

Total stock based compensation expense was $2,584 and $3,288 for the six months ended June 30, 2013 and 2012.