Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Equity [Abstract]

Stockholders' Equity

3. Stockholders’ Equity

Stock Options

The Company records compensation expense associated with share based awards granted to employees at the fair value of the award on the date of grant. The expense is recognized over the period during which an employee is required to provide services in exchange for the award.

The Company’s 2008 Equity Compensation Plan (the “Plan”) allows for the grants of options, restricted stock, stock units, stock appreciation rights and/or performance awards to officers, directors, consultants and employees. Under the Plan, the maximum number of shares authorized for issuance is 15,000,000 and the maximum number of shares of stock that may be granted to any one participant during a calendar year is 1,000,000 shares. Options to purchase shares of common stock are granted at exercise prices not less than 100% of the fair market value on the dates of grant. The term of the options range from ten to eleven years and they vest in varying periods. As of September 30, 2013, the Plan had 389,363 shares available for grant. Stock option exercises are satisfied through the issuance of new shares.

A summary of stock option activity under the Plan as of September 30, 2013, and the changes during the nine months then ended is as follows:

	Number of Shares			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($)
Outstanding at December 31, 2012		7,814,561			1.49
Granted		904,380			4.01
Exercised		(707,285	)		0.72				2,379,554
Cancelled		(197,276	)		3.49
Outstanding at September 30, 2013		7,814,380			1.80		6.4		17,703,665
Exercisable at September 30, 2013		6,234,160			1.38		5.7		16,696,929

Total recognized compensation expense for stock options was approximately $982,000 and $799,000 for the first nine months of 2013 and 2012, respectively, and was approximately $401,000 and $295,000 for the three month periods ended September 30, 2013 and 2012, respectively. As of September 30, 2013, there was approximately $2,517,935 of total unrecognized compensation cost related to nonvested outstanding stock options that is expected to be recognized over a weighted average period of approximately 2.0 years.

The per share weighted average fair value of options granted during the first nine months of 2013 and 2012 was estimated as $2.27 and $1.63 on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the table below. Expected volatilities are based on the historical volatility of the Company’s stock price. The weighted average expected life is based on both historical and anticipated employee behavior.

	September 30,
	2013			2012
Risk-free interest rate		0.7	%		0.7	%
Annualized volatility		62.5	%		61.0	%
Weighted average expected life, in years		6.0			5.0
Expected dividend yield		0.0	%		0.0	%

Stock Awards

The employment agreements with certain members of executive management include stock-based incentives under which the executives could be awarded shares of common stock upon the occurrence of various triggering events. There were no shares awarded under these agreements in the first nine months of 2013 and 35,000 shares were awarded in the first nine months of 2012.

At times, the Company makes discretionary grants of its common stock to members of management and other employees in lieu of cash bonus awards or in recognition of special achievements. Discretionary grants of common stock totaled 60,000 in the first nine months of 2012 at a weighted average fair value of $2.59.

Expense is recognized on a straight line basis over the vesting period and is based on the fair value of the stock on the grant date. The fair value of each stock award is determined based on the number of shares granted and the market price of the Company’s common stock on the date of grant. Expense recognized in connection with performance and discretionary stock awards was approximately $8,700 and $288,000 in the first nine months of 2013 and 2012, respectively, and was $0 and $13,000 in the three month periods ended September 30, 2013 and 2012, respectively.

A portion of the discretionary stock grants vested in the first nine months of 2013 and 2012. Some of these grants were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were 30,153 and 11,165 in 2013 and 2012, respectively, and were based on the value of the shares on their vesting date as determined by the Company’s closing stock price. Total payments for the employees’ tax obligations to the taxing authorities were $104,329 and $28,916 in 2013 and 2012, respectively, and are reflected as a financing activity within the Consolidated Statements of Cash Flows. These net-share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.

In addition to the shares granted to members of management and employees, at times directors receive a portion of their annual compensation in shares of Company common stock. Expense is recognized on a straight line basis over the one year period that the compensation is earned. Expense recognized for stock-based compensation to directors was $470,000 and $377,200 in the nine month periods ended September 30, 2013 and 2012, respectively, and was $204,000 and $182,800 in the three month periods ended September 30, 2013 and 2012, respectively.

As of September 30, 2013, a total of 212,618 shares granted to directors were unvested. As of September 30, 2013, there was approximately $566,000 of total unrecognized compensation cost related to nonvested stock awards that is expected to be recognized over a weighted average period of approximately 8 months. The weighted average fair value of the shares granted in the first nine months of 2013 and 2012 was $4.01 and $3.25 per share, respectively.

Long Term Incentive Program

The Company’s Board of Directors has approved a long term incentive program for the benefit of the Company’s senior executives. Pursuant to the long term incentive program, the Company’s senior executives have been awarded stock options and performance stock units with a value targeted at the median level of the Company’s peer group. In 2013, the program was modified such that the value of the annual award for each senior executive was delivered one-third in the form of performance stock units, one-third in the form of shares of restricted stock and one-third in the form of stock options. In prior years, two thirds of the value for each senior executive was delivered in the form of stock options and one third of the value was delivered in the form of performance stock units. The stock options have a ten-year term, have an exercise price equal to the closing price of the Company’s common stock on the date of grant, vest in quarterly installments over three years, and were otherwise granted on the same standard terms and conditions as other stock options granted pursuant to the Plan. The restricted stock vests in three equal annual installments. Expense recognized in connection with the restricted stock in the three and nine-month periods ended September 30, 2013 was $46,000 and $73,000, respectively. The performance stock unit awards made to the senior executives will be vested and convert into actual shares of the Company’s common stock based on the Company’s attainment of certain performance goals over a performance period of three years. No expense has been recognized in connection with the performance stock unit awards as the defined performance goals are not yet considered probable of achievement. The performance stock unit awards, restricted stock and stock options granted under the long term incentive program are summarized in the following table:

	Performance Stock Units				Restricted Stock				Stock Options
Grant Date	Number of Shares		Fair Value on Grant Date		Number of Shares		Fair Value on Grant Date		Number of Options		Exercise Price
May 17, 2011		182,000	$	1.66		—		—		317,000	$	1.66
May 17, 2012		—		—		—		—		470,000	$	2.94
July 6, 2012		137,715	$	4.26		—		—		178,731	$	4.26
May 22, 2013		185,185	$	3.96		185,185	$	3.96		327,381	$	3.96

Warrants

In the first nine months of 2013, 234,541 warrants were exercised resulting in proceeds to the Company of $261,799. In the first nine months of 2012, the Company received proceeds of $8,962,270 from the exercise of 3,731,135 warrants. Warrants to purchase a total of 1,781,428 shares of common stock were outstanding at September 30, 2013, at a weighted average exercise price of $1.08.