Stockholders' Equity

3 Months Ended

Mar. 31, 2014

Equity [Abstract]

Stockholders' Equity

Note 5- Stockholders’ Equity

At March 31, 2014, there were 12,879,651 shares of common stock, par value $.01 per share, outstanding for the Company.

On July 15, 2011 the Company also issued warrants to purchase 3% of fully diluted shares of the common stock of the Company to Breakwater Structured Growth Opportunity Fund, L.P., with an imputed exercise price equal to approximately one-hundredth of a dollar in connection with a $1.025 million subordinated mezzanine loan arrangement. These warrants are fully vested and expire on June 15, 2016. In accordance with the terms of the merger, the total number of warrants to purchase such shares was increased from 328,411 shares to 420,549 and the per share exercise price remained the same.

Included in the aforementioned Breakwater warrant, was an obligation by the Company to, among other things, honor an irrevocable put right through which the Company agreed to purchase up to the 3% of fully diluted shares of its common stock underlying the warrant, which expires on July 15, 2016. Upon completion of the merger, the irrevocable put right was removed.

The Company used a lattice model in developing a fair value for the Breakwater warrant obligation at March 31, 2014, using a quoted stock value of $1.13 per share, which represents a discount of 50% from the closing stock price. This reduction was based on the application of a discount for lack of liquidity. Other assumptions used in the above valuations include (a) risk-free interest rate of .44% based on duration, (b) weighted average expected term years of 2.29 (c) weighted average expected stock volatility of 37.08% (e) expected dividends of 0%, (f) stock price movements ranging from 1.05276571 to 0.94987896 and (g) risk neutral probabilities ranging from 0.48797016 to 0.51202984.

This valuation resulted in net income of $723 in the Statement of Operations for the three month period ended March 31, 2014.

2012 Performance Incentive Plan

On September 27, 2012, the Company’s Board of Directors approved the 2012 Performance Incentive Plan (the Plan”). The Plan allows the Company to promote the success of the Corporation and to increase stockholder value by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. Any stock option granted in the form of an incentive stock option will be intended to comply with therequirements of Section 422 of the Code. Only stock options granted to employees qualify for incentive stock option treatment. A stock option may be exercised in whole or in installments, which may be cumulative. Shares of common stock purchased upon the exercise of a stock option must be paid for in full at the time of the exercise in cash or such other consideration determined by the compensation committee. Payment may include tendering shares of common stock or surrendering of a stock award, or a combination of methods.

The Plan is administered by the Plan Administrator, being the Board or one or more committees appointed by the Board or another committee (within its delegated authority) to administer all or certain aspects of this Plan. The Administrator has full and exclusive power within the limitations set forth in the Plan to make all decisions and determinations regarding the selection of participants and the granting of awards; establishing the terms and conditions relating to each award; adopting rules, regulations and guidelines; and interpreting the Plan.

On January 2, 2014, the Company issued options to purchase 10,000 shares of the Company’s common stock to an employee with an exercise price of $2.50 per share and which contain three year vesting schedules of 1/3 each year through October 2016. These options are due to expire on October 15, 2023.

On February 10, 2014, the Company issued options to purchase 6,000 shares of the Company’s common stock to an employee with an exercise price of $2.22 per share and which contain three year vesting schedules of 1/3 each year through February 2017. These options are due to expire on February 10, 2024.

The Company, in developing a fair value for the employee options used a current stock price of $1.11-1.25, which represents a discount of 50% from the quoted stock price for lack of marketability. Other assumptions used in the above valuations include (a) risk-free interest rate of 2.13-2.41% based on duration, (b) weighted average expected terms ranging from 6.08 to 6.33 years; (c) weighted average expected stock volatility of 35.22 % and (e) expected dividends of 0%.

These valuations resulted in an net expense of $368 in the Statement of Operations for the three month period ended March 31, 2014. Total stock compensation expense for the aforementioned period was $6,105.