5.	STOCK-BASED COMPENSATION

On February 27, 2013, the Board of Directors authorized the Company’s 2013 Equity Incentive Plan (the “Incentive Plan”), which provides for the grant of non-statutory stock options and restricted shares to eligible employees and directors of the Company. The Incentive Plan authorizes the Company to issue up to 2,600,000 shares of Company’s common stock. The Company issues new shares upon the exercise of stock options. Options granted under the Plan generally expire no later than 10 years from the date of grant. The exercise price of any option granted to a 10% stockholder may be no less than 110% of the fair value of the Company’s common stock on the date of grant.

The Company granted stock options to purchase approximately 850,000 shares of its common stock on February 27, 2013 under the Incentive Plan. The stock options were granted to an executive officer and members of the Board of Directors, at an exercise price of $0.26 per share (determined by the Board of Directors based upon the range of bid prices for the Company’s common stock on the grant date), and a grant date fair value of $151. These options become fully exercisable over a two-year period (1/3 exercisable on the grant date, 1/3 exercisable one year after the grant date and the remaining 1/3 exercisable two years after the grant date, respectively) and expire on February 27, 2023.

The Company granted stock options to purchase approximately 840,000 shares of its common stock on April 30, 2014 under the Incentive Plan. The stock options were granted to certain employees including an executive officer and members of the Board of Directors, at an exercise price of $1.44 per share, and a grant date fair value of $736. These options become fully exercisable over a two-year period (1/3 exercisable on the grant date, 1/3 exercisable one year after the grant date and the remaining 1/3 exercisable two years after the grant date, respectively) and expire on April 30, 2024.

The Company granted stock options to purchase approximately 25,000 shares of its common stock on May 12, 2014 under the Incentive Plan. The stock options were granted to a non-employee independent contractor at an exercise price of $1.24 per share, and a grant date fair value of $24. These options become fully exercisable over a two-year period (1/3 exercisable on the grant date, 1/3 exercisable one year after the grant date and the remaining 1/3 exercisable two years after the grant date, respectively) and expire on May 12, 2024.

Total stock-based compensation recorded for the three and six months ended June 30, 2014 were $310 and $323, and for the three and six months ended June 30, 2013 were $13 and $68, respectively, and is included in selling, general and administrative expenses. The fair values of options granted were estimated on the date of grant using the Black-Scholes Merton option pricing model based on the assumptions included in the table below. The fair value of the Company’s stock option awards is charged to expense over the vesting life of the underlying stock options using the straight line method. Expected volatility is based on the historical volatility of the Company’s common stock. The risk-free interest rate for periods within the contractual life of the stock option award is based on the yield of U.S. Treasury bonds on the grant date with a maturity equal to the expected term of the stock option. The expected life of stock option awards granted to employees and non-employee directors is based upon the “simplified” method for “plain vanilla” options described in SEC Staff Accounting Bulletin No. 107, as amended by SEC Staff Accounting Bulletin No. 110. Forfeiture rates are based on management’s estimates.

	Six months ended June 30, 2014			Six months ended June 30, 2013
Expected volatility		79	%		84	%
Expected dividend yield		0.00	%		0.00	%
Weighted average risk-free interest rate		1.81	%		1.00	%
Expected life	5.50 years			5.50 years
Forfeiture rate		0	%		0	%

As of June 30, 2014, the Company has approximately $506 of unrecognized stock compensation expense which will be recognized over a period of approximately two years.

	Shares (In thousands)			Weighted Average Exercise Price			Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2013		905		$	0.28
Grants		865			1.44
Exercised		(23	)		(0.34	)
Forfeited, cancelled or expired		—			—
Outstanding at June 30, 2014		1,747		$	0.85			9	$	1,003

Exercisable at June 30, 2014		854		$	0.66			9	$	647

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing price of the Company’s common stock on the date of determination for those awards that have an exercise price currently below the closing price. During the six months ended June 30, 2014, there were 23,600 shares exercised under the Incentive Plan with an intrinsic value of $22.

Availability for Future Issuance – As of June 30, 2014, stock options to purchase approximately 830,000 shares of the Company’s common stock were available for future issuance under the Incentive Plan.