Stock-Based Compensation

We maintain a stock-based compensation program intended to attract, retain and provide incentives for talented employees and directors and align stockholder and employee interests. Currently, we grant options and restricted stock units ("RSUs") from the 2005 Long-Term Incentive Plan ("2005 LTIP") and the 2010 Equity Compensation Plan (“2010 ECP”). Option and restricted stock unit vesting periods are generally up to three years.

Compensation Expense

We recorded stock-based compensation expense for all equity incentive plans of approximately $686,745 and $842,752 for the years ended December 31, 2013 and 2012, respectively. Total compensation cost not yet recognized at December 31, 2013 was $701,164 to be recognized over a weighted-average recognition period of 1.3 years.

Significant Grants and Cancellations

2013

During the first quarter of 2013, we granted to certain employees a total of 100,000 RSUs with a weighted average fair value of $0.72 per share. These shares vest ratably over three years. During the second quarter of 2013, we granted members of our board of directors a total of 80,000 RSUs with a weighted average fair value of $0.77 per share which vest on December 31, 2013. During the fourth quarter, we granted a total of 428,500 RSU's with a weighted average fair value of $1.44 per share which vest over three years.

During the third quarter of 2013 we granted RSUs to certain executives and management employees as part of an equity compensation program. The program includes service-based and performance-based components. The service-based component of the plan granted up to 172,500 shares to certain executives and management employees effective July 31, 2013, which vest completely on February 1, 2014. The performance-based component of this plan granted 335,000 shares. The performance conditions were not met and therefore, the shares terminated in 2013. The share price at the date of the grant was $0.87.

During 2013, 252,755 shares were settled with common stock at the settlement date fair value. A total of 173,371 shares were issued.

On March 31, 2013, some of our employees voluntarily canceled certain outstanding stock options for no consideration. As a result, 805,134 shares were canceled and returned to 2005 LTIP and 2010 ECP plans. The cancellation of these options resulted in the recognition of $49,577 in additional stock-based compensation expense, which represented the fair value of the canceled options that had not yet been recognized as of the date of cancellation.

2012

On January 1, 2012, the number of shares of our common stock issuable under the 2010 ECP was increased by 100,357 shares due to the ever-green provision as part of the 2010 ECP. Additionally, effective February 29, 2012, our shareholders increased the number of shares of our common stock issuable under the 2010 ECP by 2.5 million shares. As of December 31, 2012, we had reserved under our 2005 LTIP 1.0 million shares of common stock for issuance and another 3,385,945 shares under our 2010 ECP.

On July 31, 2012, the Company granted 445,500 RSUs, of which 296,505 were granted to our executive officers, certain of our senior management and our Board of Directors. These RSUs granted to our executive officers, certain of our senior management and our Board of Directors were subject to a 2012 performance target that was not met. As such, these RSAs did not vest. The remaining 148,995 RSAs were granted to the other members of the management team and vested on February 1, 2013 provided the grantee remained in the company’s employ on that date. Further, the Company granted to non-management employees on July 31, 2012, 49,500 options to purchase the Company’s common stock at $0.56 per share, the closing price of the stock on the grant date. The options fully vested on February 1, 2013 provided the grantee remained in the Company’s employ on that date.

Award Information and Activity

The following table summarizes the stock grants outstanding under our 2005 LTIP and 2010 ECP plans as of December 31, 2013:



	Options Outstanding	RSUs Outstanding	Options and RSUs Exercised	Available Shares	Total
2010 ECP	258,998	86,744	1,060,823	2,129,380	3,535,945
2005 LTIP	33,748	623,036	328,711	14,505	1,000,000
Total	292,746	709,780	1,389,534	2,143,885	4,535,945

The fair value of restricted stock units is determined using market value of the common stock on the date of the grant. The fair value of stock options is determined using the Black-Scholes-Merton valuation model. The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense and include the expected life of the option, stock price volatility, risk-free interest rate, dividend yield, exercise price, and forfeiture rate. Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. The forfeiture rate, which is estimated at a weighted average of 4.6% of unvested options outstanding, is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

At December 31, 2013, the aggregate intrinsic value of options outstanding under the 2005 LTIP and 2010 ECP plans was $0 with a weighted average remaining contractual term of 6.9 years. Of the outstanding options, 266,408 options are exercisable with an aggregate intrinsic value of $0, a weighted average exercise price of $2.72 and a weighted average remaining contractual term of 7.0 years. We expect to all non-vested options to fully vest.

The total fair value of options vested during 2013 and 2012 was approximately $240,000 and $609,000, respectively. The total intrinsic value of options exercised in 2013 was $2,813.

The following table summarizes our stock option activity under the 2005 LTIP and 2010 ECP plans during 2013:



	Options		Weighted Average Exercise Price
Outstanding, beginning of year	1,179,199		$	2.66
Granted	—		$	—
Forfeited, expired or cancelled	(882,703	)	$	2.65
Exercised	(3,750	)	$	0.56
Outstanding, end of year	292,746		$	2.72
Exercisable, end of year	266,408		$	2.72

We also have a separate plan which we acquired from Vertro. This plan is not authorized to issue any additional shares. During 2013, options in the amount of 5,504 shares with a weighted average exercise price of $22.64 expired. At December 31, 2013 we had 165,827 options outstanding and exercisable under this plan with a weighted average exercise price of $45.36. The weighted average fair value of these options is $0, and their aggregate intrinsic value is also $0. The weighted average remaining contractual life of the outstanding and exercisable options is 1.1 years. The exercise price of these options ranges from $12.55 to $74.84.

The following table summarizes information about stock options outstanding as of December 31, 2013:



Range of Exercise Price	Shares	Weighted Average Remaining Contractual Life ( Years)	Weighted Average Exercise Price
$0.00 – $3.00	262,658	7.0	$	2.71
$3.01 - $9.99	3,750	6.1	3.70
Total	266,408	7.0	$	2.72

No options were granted during 2013. There were 49,500 options granted during 2012, and the fair value of these options was estimated using the following weighted averages:



	2012
Expected life (in years)	3.15
Volatility	174.2	%
Risk free interest rate	0.30	%
Dividend yield	—	%

Expected volatility is based on the historical volatility of our common stock over the period commensurate with or longer than the expected life of the options. The expected life of the options is based on the vesting schedule of the option in relation to the overall term of the option. The risk free interest rate is based on the market yield of the U.S. Treasury Bill with a term equal to the expected term of the option awarded. We do not anticipate paying any dividends so the dividend yield in the model is zero.

The following table summarizes our restricted stock activity for 2013:



	Restricted Stock		Weighted Average Fair Value
Outstanding, beginning of year	181,535		$	0.71
Granted	1,116,000		$	1.07
Settled	(252,755	)	$	0.68
Terminated	(335,000	)	$	0.87
Outstanding, end of year	709,780		$	1.45

No restricted stock was forfeited during 2013.