Stockholders' Equity

6 Months Ended

Jun. 30, 2013

Stockholders' Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 7 — STOCKHOLDERS’ EQUITY

Effective April 26, 2012, we granted 60,000 shares of common stock to six employees under the long-term incentive bonus program. The 60,000 shares are not performance based and vest semi-annually over a three year period, subject to ongoing employment. These shares were valued at $138,000 using fair market value of the common stock at the date of grant and will be amortized to compensation expense over three years.

Effective April 26, 2012, we granted 804,000 common stock options to nine employees and four outside board members. These options vest semi-annually over five years and have a five year term. The stock options were granted at an exercise price of $2.30 per common share which was equal to the fair market value of the common stock at the date of the grant valued using the Black Scholes valuation model. The model uses key estimates such as estimated useful lives of the options and the estimated volatility of our stock price. The options are being amortized to share-based compensation expense over the vesting period. As of August, 2012, a total of 18,000 of these options were cancelled due to separation from service.

In June 2012, we granted 150,000 common stock options due to a severance agreement. These options vested immediately. These options were granted at an exercise price of $2.30 per common share valued using the Black Scholes valuation model and similar assumptions as the April, 2012 options.

In August 2012, we granted 30,000 shares of common stock to an outside board member under the long-term incentive bonus program. The 30,000 shares are not performance based and vest semi-annually over a three year period, subject to ongoing employment. These shares were valued at $52,500 using fair market value of the common stock at the date of grant and will be amortized to compensation expense over three years.

In August 2012, we granted 60,000 common stock options to an outside board member. These options vest semi-annually over five years and have a five year term. The stock options were granted at an exercise price of $2.30 per common share which was equal to the fair market value of the common stock at the date of the grant valued using the Black Scholes valuation model. The options are being amortized to share-based compensation expense over the vesting period.

In December 2012, we granted 9,900 shares of common stock to seventeen employees under the long-term incentive bonus program. The 9,900 shares are vested immediately and the shares were valued using fair market value of the common stock at the date of grant.

In August 2006, we granted 800,000 common stock options to two employees with an expiration date of August 16, 2011. We extended those options in September 2011 to August 16, 2012. We recorded $11,831 of additional stock-based compensation in September 2011 related to the one year extension. In 2012, we extended these options to August 16, 2014 due to provisions of severance agreements. We recorded an additional stock based compensation in December 2012 of $19,672 related to this two year extension.

Due to severance agreements, effective in April 2012, certain employees became vested 100% on their stock options and stock awards.

In February 2013, we granted 42,000 shares of stock to five employees under the long-term incentive bonus program. The 36,000 shares are not performance based and vest semi-annually over a three period and 6,000 shares are performance based and vest semi-annually over a three year period, subject to ongoing employment. The 42,000 shares were valued at $2.50 using fair value of the common stock at the date of grant and will be amortized to compensation expense semi-annually over three years.

In February 2013, we also granted 346,000 common stock options to seven employees and five outside board members. These options vest semi-annually over five years and have a five year term. These stock options were granted at an exercise price of $2.50 per common share and were valued using the Black Scholes valuation model. The options are being amortized to share-based compensation expense semi-annually over the vesting period. Of the 346,000 options granted, 12,000 of the options are performance based.

The following are assumptions made in computing the February 2013 option fair value:

Average risk-free interest rate	0.89	%
Dividend yield	0	%
Expected term	5 years
Average expected volatility	78.40	%

In May 2013, we also granted 100,000 common stock options to an outside board member. These options vest semi-annually over five years and have a five year term. These stock options were granted at an exercise price of $3.00 per common share and were valued using the Black Scholes valuation model. The options are being amortized to share-based compensation expense semi-annually over the vesting period.

The following are assumptions made in computing the May 2013 option fair value:

Average risk-free interest rate	0.84	%
Dividend yield	0	%
Expected term	5 years
Average expected volatility	78.79	%

As a result of the above stock and option transactions, we recorded total share-based compensation of $325,800 and $778,252 for the three months ended June 20, 2013 and 2012, respectively. As a result of the above stock and option transactions, we recorded total share-based compensation of $635,863 and $1,016,485 for the six months ended June 30, 2013 and 2012, respectively.

The share-based compensation expense for the three months ended June 30, 2013 and 2012 is as follows:

Common stock awards

Issue Date	Total Shares  Awarded		Average Issuance  Price		6/30/13		6/30/12
December 2010		136,500	$	3.00	$	11,625	$	79,125
May 2011		420,000		2.68		60,300		254,600
December 2011		12,000		2.68		2,680		2,680
April 2012		60,000		2.30		11,500		23,000
August 2012		30,000		1.75		4,375		—
February 2013		42,000		2.50		8,750		—
					$	99,230	$	359,405

Stock option awards

Issue Date	Total Options  Awarded		Average Issuance  Price		6/30/13		6/30/12
December 2010		368,000	$	3.00	$	30,282	$	164,245
May 2011		378,000		2.68		37,083		131,947
December 2011		36,000		2.68		5,176		5,175
April 2012		804,000		2.30		86,460		117,480
August 2012		60,000		2.30		6,600		—
February 2013		346,000		2.50		45,231		—
May 2013		100,000		3.00		15,738		—
					$	226,570	$	418,847
Total share based expense					$	325,800	$	778,252

The stock-based compensation expense for the six months ended June 30, 2013 and 2012 is as follows:

Common stock awards

Issue Date	Total Shares  Awarded		Average Issuance  Price		6/30/13		6/30/12
December 2010		136,500	$	3.00	$	23,251	$	104,250
May 2011		420,000		2.68		120,600		348,400
December 2011		12,000		2.68		5,360		5,360
April 2012		60,000		2.30		23,000		23,000
August 2012		30,000		1.75		8,750		—
February 2013		42,000		2.50		17,500		—
					$	198,461	$	481,010

Stock option awards

Issue Date	Total Options  Awarded		Average Issuance  Price		6/30/13		6/30/12
December 2010		368,000	$	3.00	$	60,565	$	221,368
May 2011		378,000		2.68		74,166		186,278
December 2011		36,000		2.68		10,351		10,349
April 2012		804,000		2.30		172,920		117,480
August 2012		60,000		2.30		13,200		—
February 2013		346,000		2.50		90,462		—
May 2013		100,000		3.00		15,738		—
					$	437,402	$	535,475
Total share based expense					$	635,863	$	1,016,485