10. Shared-Based Compensation

12 Months Ended

Dec. 31, 2013

Disclosure Of Compensation Related Costs

Share-based compensation - Note 10

10. Share-based compensation

We use the straight-line attribution method to allocate the fair value of share-based compensation awards over the requisite service period for each award. The valuation of and accounting for share-based awards includes a number of complex and subjective estimates. These estimates include, but are not limited to, the future volatility of our stock price, future stock option exercise behaviors, estimated employee turnover and award forfeiture rates.

As part of our plan to conserve cash used in operations, we have implemented share-based compensation programs under which we issued shares of our common stock as compensation instead of cash. We have allocated the expense related to these programs to various financial statement lines consistent with the method used for allocating all share-based compensation.

In August 2013, we issued 201,000 shares of our common stock to employees for payment of 2012 performance bonuses. These shares were valued using our closing stock price on the date of grant. These shares vested in November 2013 and expense was recognized over the vesting period. During 2013, we expensed $457,000 of share-based employee compensation for these awards.

In August 2012, we issued 440,000 shares of our common stock to non-executive employees for retention purposes. These shares were valued using our closing stock price on the date of grant. These shares vest 40% in August 2012, 30% in December 2012, and 30% in August 2013 and expense is recognized over the vesting period. During 2013 and 2012, we expensed $175,000 and $562,000, respectively, of share-based employee compensation for these awards.

In May 2012, we issued 227,000 shares of our common stock to non-executive employees as the remaining payment of 2010 bonuses in lieu of cash. These shares were valued using our closing stock price on the date of grant. We expensed $345,000 of share-based employee compensation for these awards at grant.

Description of Incentive Plans

The Company currently has two share-based incentive plans. The 2013 Incentive Plan described below is administered by the Board of Directors, or its designated committee ("Plan Administrator"), and provides for various awards as determined by the Plan Administrator. In June 2008, we determined not to issue additional options from a second share-based incentive plan, the Independent Director Stock Option Plan described below.

The 2013 Incentive Plan has 4.4 million shares authorized, of which 940,000 shares were available for awards as of December 31, 2013. The 2013 Incentive Plan permits granting non-qualified stock options (NSOs), incentive stock options (ISOs), stock appreciation rights, restricted or unrestricted stock, deferred stock, other share-based awards, or cash awards to employees, officers, directors and certain non-employees of the Company. Any award may be a performance-based award. Awards granted under the 2013 Incentive Plan have generally been to employees under non-qualified stock option agreements with the following provisions: exercise prices greater than or equal to the Company's closing stock price on the date of grant; vesting periods ranging from three years to four years; expiration 10 years from the date of grant; and optionees who terminate their service after vesting have a limited time to exercise their options (typically three to twelve months).

The Independent Director Stock Option Plan (IDSOP) has 113,000 shares authorized, of which 62,000 are issued and outstanding as of December 31, 2013. The IDSOP permits granting NSOs to independent directors of the Company. Grants awarded under the IDSOP generally have the following terms: exercise price equal to the Company's closing stock price on the date of grant, expiration 10 years from the date of grant, and vested grants remain exercisable until their expiration dates if a director leaves the Board. In June 2008, the Company shareholders approved an amendment to the 2013 Incentive Plan described above to allow non-employee directors to participate in the plan.

Options Valuation Methodology and Assumptions

We use the Black-Scholes option valuation model to determine the fair value of options granted and use the closing price of our common stock as the fair market value of our stock on that date.

We consider historical stock price volatilities, volatilities of similar companies and other factors in determining estimates of future volatilities.

We use historical lives, including post-termination exercise behavior, publications, comparable company estimates, and other factors as the basis for estimating expected lives.

Risk free rates are based on the U.S. Treasury Yield Curve as published by the U.S. Treasury.

The following table summarizes the weighted-average valuation assumptions and weighted-average grant date fair value of options granted during the periods shown below:

		Year Ended December 31,
		2013		2012
Assumptions (weighted average)
Volatility		96%		98%
Expected term (in years)		4.1		4.5
Risk-free rate		1.0%		0.6%
Expected dividends		0.0%		0.0%
Pre-vest forfeiture rate		8.5%		8.5%
Grant date fair value of options granted	$	1.49	$	1.39

Options Activity and Positions

The following table summarizes activity and positions with respect to options for the two years ended December 31, 2013:

				Weighted
				Average
			Weighted	Remaining
			Average	Contractual		Aggregate
			Exercise	Term		Intrinsic
Options	Shares		Price	(years)		Value
Outstanding as of December 31, 2011	964,000	$	24.00	5.8	$	-
Granted	671,000		1.97
Exercised	(16,000)		1.80
Forfeited or expired	(301,000)		21.20
Outstanding as of December 31, 2012	1,318,000		13.71	6.8		-
Granted	824,000		2.22
Exercised	(23,000)		1.80
Forfeited or expired	(214,000)		13.86
Outstanding as of December 31, 2013	1,905,000	$	8.86	7.4	$	1,500
Vested and expected to vest as of December 31, 2013	1,797,000	$	9.26	7.3	$	1,443
Exercisable as of December 31, 2013	934,000	$	15.41	5.6	$	750

The total intrinsic value of options exercised during the years ended December 31, 2013 and 2012 were $21,000 and $13,000, respectively.

The total grant date fair value of options vested during the years ended December 31, 2013 and 2012 was $1.7 million and $2.5 million, respectively. As of December 31, 2013, our unamortized share-based compensation was $1.2 million which we plan to amortize over the next 2.3 years.

In March 2011, we issued 85,000 restricted stock units of the Company's common stock to executive employees. These shares vest conditionally upon completion of certain service and performance objectives by June 30, 2014. The grant date fair value of the performance based restricted shares is recognized over the respective service periods based on an assessment of the probability that performance goals will be met.

As of December 31, 2013, our unamortized share-based compensation related to the restricted stock units was $145,000 which we plan to amortize over the next six months.