Share-Based Compensation

12 Months Ended

Dec. 31, 2012

Share-based Compensation [Abstract]

Share-Based Compensation

SHARE-BASED COMPENSATION

Stock incentive plans - On July 1, 1998, the Company’s shareholders adopted the 1998 Stock Option Plan and reserved 500,000 shares of common stock for issuance under this plan.  Effective September 4, 2003, the Company’s shareholders adopted an amendment and restatement of this plan, which, among other things, increased the number of shares reserved under this plan to 3,500,000. This plan expired July 1, 2008 although options granted under this plan remain outstanding at December 31, 2012.

On June 1, 2006, the Company’s shareholders adopted the 2006 Stock Incentive Plan (the “2006 Plan”) under which 2,500,000 shares of common stock were reserved for issuance.  The 2006 Plan provides for the issuance of non-qualified stock options, ISOs, restricted stock awards and stock appreciation rights, and permits grants to employees, non-employee directors and consultants of the Company.

Generally, stock options granted under these plans vest over a period from four to five years and have a term of nine years.  Certain stock options granted under these plans were fully vested upon grant and certain options have terms of five years.

Stock Option Accounting - The Company recognizes share-based compensation expense based on the fair value of share-based awards as estimated at the grant date.  Share-based compensation expense for 2012, 2011 and 2010 was approximately $38,300, $44,500 and $56,400, respectively, and is classified as a general and administrative expense.  Tax benefits related to this expense were immaterial because virtually all share-based compensation resulted from grants of ISOs.  No tax benefit is recorded for an ISO unless upon exercise a disqualifying disposition occurs.  The Company will prospectively record any excess tax benefits from the exercise of stock options as cash flows from financing activities. There were no material excess tax benefits in 2012, 2011 or 2010.

Fair Value - The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

	Year Ended December 31,
	2012	2011	2010
Weighted average expected life (years)	4.5 - 6.0	5.0 - 9.0	9.0
Risk-free interest rate	0.6% - 1.0%	0.9% - 3.3%	3.1%
Expected volatility	245% - 310%	86% - 98%	105%
Expected dividend yield	—%	—%	—%

The weighted average expected life is based on the option term.  The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option.  The expected volatility is based on historical volatility rates.  The expected dividend yield is 0.0% since the Company has no history of paying dividends and currently has no plans to do so.

Stock Option Activity - A summary of stock option activity for the three years ended December 31, 2012 is as follows:

	Options		Weighted- Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding on January 1, 2010	2,130,440		$	0.40
Granted	25,000		0.36
Exercised	(306,900	)	0.15
Forfeited/Canceled	(650,150	)	0.63
Outstanding on December 31, 2010	1,198,390		0.30
Granted	57,000		0.25
Exercised	—		—
Forfeited/Canceled	(64,820	)	0.50
Outstanding on December 31, 2011	1,190,570		0.33
Granted	116,800		0.24
Exercised	—		—
Forfeited/Canceled	(446,110	)	0.18
Outstanding on December 31, 2012	861,260		$	0.40	4.4	$	1,000
Exercisable on December 31, 2012	661,500		$	0.41	3.5	$	1,000

A summary of the status of the Company’s non-vested stock options as of December 31, 2012, and changes during the year then ended, is presented below:

	Shares		Weighted Average Grant Date Fair Value per Share
Non-vested stock options January 1, 2012	179,910		$	0.44
Non-vested stock options granted	116,800		0.24
Vested stock options	(80,170	)	0.47
Forfeited stock options	(16,780	)	0.17
Non-vested stock options at December 31, 2012	199,760		0.29

Additional information related to stock options granted, vested and exercised for the three years ended December 31, 2012 is a follows:

	Year Ended December 31,
	2012		2011		2010
Grant date fair value of stock options granted	$	27,663	$	11,879	$	8,100
Grant date fair value of stock options vested	37,814		53,871		90,810
Intrinsic value of stock options exercised	—		—		47,151

As of December 31, 2012, there was approximately $55,000 of total unrecognized compensation cost related to stock option grants. That cost is expected to be recognized over a weighted average period of 2.5 years.