Stock Based Compensation

9 Months Ended

Sep. 30, 2014

Stock-Based Compensation [Abstract]

Stock-Based Compensation

The Company estimates the fair value of stock options on the grant date using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton option-pricing model requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. There is no expected dividend rate. Historical Company information was the basis for the expected volatility assumption. The fair value of grants was calculated using historical volatility as the Company believes that the historical volatility over the life of the option is indicative of expected volatility in the future. The risk-free interest rate is based on the U.S. Treasury zero-coupon rates with a remaining term equal to the expected term of the option. Accounting Standards Codification ("ASC") 718, Stock Compensation, also requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based upon past history of actual performance, forfeiture rates ranging from zero percent to twenty percent have been assumed for options granted.

On June 11, 2014, the Board of Directors granted options to purchase a total of 75,000 shares of the Company's common stock to Michael Ferrantino, Sr., pursuant to the Company's 2011 Incentive Plan. These stock options have an exercise price of $4.90, a five-year life expiring on June 11, 2019, and vest as follows: 60% immediately; an additional 20% on the second anniversary of the grant date; and the remaining 20% on the third anniversary of the grant date. These stock options have a grant date fair value of $1.48 per option.

In connection with Gregory P. Anderson's resignation on May 21, 2014, the Company modified the terms of his August 9, 2012 Incentive Stock Option Agreement pursuant to which options to purchase 7,500 shares of the Company's common stock vested immediately. The Company also modified the terms of Mr. Anderson's February 29, 2012 and March 26, 2013 Restricted Stock Agreements pursuant to which a total of 1,470 restricted shares will vest six months after his resignation and an additional 1,470 restricted shares will vest one year after his resignation.

On March 13, 2014, the Board of Directors granted a total of 24,576 options to purchase shares of the Company's common stock to members of executive management, pursuant to the Company's 2011 Incentive Plan. These stock options have an exercise price of $5.82, a five-year life expiring on March 13, 2019, and vest as follows: 30% on the first anniversary of the grant date; an additional 30% on the second anniversary of the grant date; and the remaining 40% on the third anniversary of the grant date. These stock options have a grant date fair value of $1.88 per option.

The terms of the options reflect the objective to align management incentives with long-term value creation.

Restricted stock awards are granted at a value equal to the market price of our common stock on the date of the grant. There were no restricted stock awards granted during the nine months ended September 30, 2014.

Compensation expense related to share-based compensation is recognized over the applicable vesting periods. As of September 30, 2014, there was approximately $140,000 of total unrecognized compensation expense related to unvested share-based compensation arrangements.

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