STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2013

STOCKHOLDERS' EQUITY [Abstract]

SHAREHOLDERS' EQUITY

NOTE 6 – STOCKHOLDERS’ EQUITY

PREFERRED STOCK

The Company has 2,000,000 authorized preferred shares of which none were issued and outstanding at December 31, 2013 and 2012.

COMMON STOCK, OPTIONS AND STOCK GRANTS

Year Ended December 31, 2013

During the year ended December 31, 2013, 98,000 restricted common shares were granted with an aggregate grant date fair value of approximately $80,000.  During the year ended December 31, 2013, approximately 109,000 restricted common shares with an aggregate grant date fair value of approximately $80,000 vested.

During the year ended December 31, 2013, the Company issued 55,181 shares of restricted common stock with a grant date fair value of approximately $42,000, pursuant to the Company’s Directors’ Deferred Compensation Plan dated January 1, 2008 (the “Directors’ Deferred Compensation Plan”), to a former director for past services. 20,595 of the 55,181 shares of restricted common stock were issued to settle approximately by $20,000 of accrued directors’ fees recorded on the Company’s balance sheet.

During the year ended December 31, 2013, the Company granted, to employees of the Company, options to acquire 360,909 shares of common stock with exercise prices of $1.15 (for a grant of 15,000 options), $1.25 per share (for grants of 75,000 options), $1.50 (for a grant of 80,000 options), and $1.65 per share (for grants of 190,909 options), exercisable over a term of five years from the date of grant. The options vest over a four year period, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting in equal monthly amounts through the fourth anniversary of the grant date. The grant date fair value of the stock options issued was determined to be approximately $330,000.  During the year ended December 31, 2013, the Company recognized approximately $109,000 of expense related to the vesting of outstanding stock options.  For the year ended December 31, 2013, options to acquire 56,500 shares of common stock with a weighted average exercise price of $1.43 expired unexercised, and options to acquire 236,875 shares of common stock with a weighted average exercise price of $1.14 were forfeited. On September 5, 2013, Matthew E. Oakes, the Company’s President and Chief Executive Officer, received 50,348 shares of the Company’s common stock in a cashless exercise of 172,500 stock options that had an exercise price of $1.15 per share.

Year Ended December 31, 2012

During the year ended December 31, 2012, 150,000 restricted common shares were granted with an aggregate grant date fair value of approximately $99,000.  During the year ended December 31, 2012, 89,607 restricted common shares with an aggregate grant date fair value of approximately $65,000 vested, and 35,000 of unvested restricted common shares with an aggregate grant date fair value of approximately $26,000 were forfeited.

During the year ended December 31, 2012, the Company granted, to certain employees of the Company, options to acquire an aggregate of 875,000 shares of common stock for an exercise price of $1.15 per share, exercisable over a term of five years from the date of grant.  The options vest over a four year period, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting in equal monthly amounts through the fourth anniversary of the grant date.  The grant date fair value of the stock options granted during the year ended December 31, 2012 was determined to be approximately $527,000, of which approximately $98,000 was recognized as stock compensation expense for the year ended December 31, 2012.  During the year ended December 31, 2012, options to acquire 17,000 shares of common stock with a grant date fair value of approximately $12,000 expired unexercised and options to acquire 80,000 shares of common stock with a grant date fair value of approximately $46,000 were forfeited.  On April 5, 2012, the Company issued 261,503 shares of common stock with a grant date fair value of approximately $277,000, pursuant to the Direct Insite Corp. Directors’ Deferred Compensation Plan dated January 1, 2008, to two former Directors for past services.

STOCK OPTION PLANS

The Company grants options under multiple stock-based compensation plans that do not differ substantially in the characteristics of the awards.  Nonqualified and incentive stock options have been granted to directors, officers and employees of the Company under the Company’s stock option plans.  Options generally vest over three to four years and expire five years from the date of the grant.  On April 1, 2013, the Company’s 2003 Stock Option/Stock Issuance Plan and its 2003-A Stock Option/Stock Issuance Plan expired resulting in the expiration of 278,532 and 37,325 options, respectively, available for issuance.  As of December 31, 2013, 12,894 shares were available for issuance under the Company’s 2004 Stock Option/Stock Issuance Plan, its sole remaining plan under which options may be issued.

The following is a summary of stock option activity for the year ended December 31, 2013, relating to all of the Company’s common stock plans (share amounts are in thousands):

						Weighted Average
				Weighted		Remaining
	Shares			Average Exercise		Contractual Term		Aggregate Intrinsic Value
	(in thousands)			Price		(in years)		(in thousands)
Outstanding at January 1, 2013		906		$	1.17		3.90	$	--
Granted		361		$	1.51			$	2
Expired		(57	)	$	1.43			$	1
Exercised		(173	)	$	1.15			$	19
Forfeited		(237	)	$	1.14			$	26
Outstanding at December 31, 2013		800		$	1.31		3.77	$	57
Exercisable at December 31, 2013		188		$	1.16		3.06	$	19

During the year ended December 31, 2013, Company granted approximately 361,000 stock options with weighted average grant date fair values of $0.91 per share.   During the year ended December 31, 2012, Company granted approximately 875,000 stock options with weighted average grant date fair values of $0.60 per share.  The fair values of the stock options granted were estimated on the date of grant using the Black-Scholes-Merton option-pricing model that uses the following weighted-average assumptions for the years ended December 31, 2013 and 2012:

	2013			2012
Expected term	3.75 years			3.75 years
Expected volatility		91% - 97	%		154% - 175	%
Expected dividend yield		--			--
Risk-free interest rate		0.6% - 0.8	%		0.36% - 0.74	%

The following table summarizes stock option information as of December 31, 2013:

				Weighted Average
		Number Outstanding		Remaining	Options Exercisable
Exercise Prices		(in thousands)		Contractual Life	(in thousands)
$	1.15		498	3.29 years		157
$	1.20		31	2.48 years		31
$	1.50		80	4.97 years		-
$	1.65		191	4.74 years		-
Total			800	3.77 years		188

As of December 31, 2013, there was approximately $299,000 of unrecognized compensation costs related to stock options outstanding that will be recognized as expense over a weighted average period of 3.15 years.

RESTRICTED STOCK GRANT

A summary of activity related to the Company’s non-vested stock grants for the year ended December 31, 2013 is presented below:

Non-Vested Shares	Shares (in thousands)			Weighted-Average Grant Date Fair Value
Non-Vested at January 1, 2013		60		$	0.66
Granted		98		$	0.82
Vested		(109	)	$	0.73
Non-Vested at December 31, 2013		49		$	0.82

The future expected expense for non-vested shares is approximately $40,000 and will be recognized on a straight-line basis over the period from January 1, 2014 through December 31, 2014.