10. Share-Based Employee Compensation

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

10. Share-Based Employee Compensation

The Company has employee and non-employee director stock option programs. Related to these programs, and in accordance with ASC Topic 718, “Compensation-Stock Compensation”, the Company recorded $42 and $27 of share-based employee compensation expense during the years ended December 31, 2013 and 2012, respectively, and is included as a component of cost of products and selling, general and administrative expenses in the accompanying consolidated statements of operations. No amount of share–based employee compensation expense was capitalized as part of capital expenditures or inventory for the years presented.

The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant. The share-based employee compensation expense recorded in the years ended December 31, 2013 and 2012 was calculated using the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s common stock over the period of time commensurate with the expected life of the stock options. While the Company paid a one-time special cash dividend in 2007, it has never paid a cash dividend previously, nor is a cash dividend planned for the future. Accordingly, the assumed dividend yield is zero. The Company has estimated its future stock option exercises. The expected term of option grants is based upon the observed and expected time to the date of post vesting exercises and forfeitures of options by the Company’s employees. The risk-free interest rate is derived from the average U.S. Treasury rate for the period, which approximates the rate at the time of the stock option grant.

	FY 2013	FY 2012
Expected Volatility	72.3%	72.3%
Expected Dividends	0.00	0.00
Expected Term (in years)	3.0	3.0
Risk-Free Rate	1.05%	0.40%
Estimated forfeitures	0.0%	0.0%

A summary of stock option activity under our stock option plans as of December 31, 2013, and changes during the year ended December 31, 2013 are presented below:

		Stock Options	Wgt. Avg. Exercise Price ($) Per Share	Wgt. Avg. Remaining Contractual Life (Years)	Wgt Avg. Grant Date Fair Value ($) Per Share	Aggregate Intrinsic Value ($)
As of January 1, 2013
Outstanding		460,944	3.47	—	2.29	—
Vested		435,944	3.55	—	2.38	—
Nonvested		25,000	2.03	—	0.68	—
Period activity
Issued		90,000	2.59	—	0.98	—
Exercised		63,333	1.95	—	1.19	—
Forfeited		—	—	—	—	—
Expired		5,000	4.50	—	2.68	—
As of December 31, 2013
Outstanding		482,611	3.50	4.13	2.18	344,155
Vested		410,942	3.64	3.65	2.41	292,653
Nonvested		71,669	2.68	6.89	0.87	51,503
Outstanding:
Range of Exercise Prices ($) Per Share		Stock Options Outstanding	Wgt. Avg. Exercise Price ($) Per Share	Wgt. Avg. Remaining Contractual Life (Years)
1.50	1.89	106,000	1.73	3.52
2.00	2.80	154,167	2.26	4.29
3.45	11.40	222,444	5.19	4.31
		482,611	3.50	4.13
Exercisable:
Range of Exercise Prices ($) Per Share		Stock Options Exercisable	Wgt. Avg. Exercise Price ($)
1.50	1.89	106,000	1.73
2.00	2.80	107,498	2.26
3.45	11.40	197,444	5.41
		410,942	3.64

The weighted-average grant-date fair value per option granted during the years 2013 and 2012 was $0.98 and $0.68, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2013 and 2012 was approximately $90 and $15, respectively.