STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2014

STOCK-BASED COMPENSATION [Abstract]

STOCK-BASED COMPENSATION

2. STOCK-BASED COMPENSATION

The Company accounts for compensation expense associated with stock options based on the fair value of the options on the date of grant.

The Company’s net loss for the three and six months ended June 30, 2014 includes approximately $103,000 and $206,000, respectively, of non-cash compensation expense related to the Company’s stock options.  The non-cash compensation expense related to all of the Company’s stock-based compensation arrangements is recorded as a component of selling, general and administrative expenses.

The estimated fair value of each option award granted was determined on the date of grant using the Black-Scholes option valuation model.  No options were granted during the three months ended June 30, 2014 and 2013.  The following weighted-average assumptions were used for the options granted during the six months ended June 30, 2014 and 2013:

	2014	2013
Risk-free interest rate	1.45%	0.72%
Expected volatility	102%	106%
Dividend yield	0%	0%
Expected option term	5 years	5 years

A summary of the status of the Company’s stock option plans as of June 30, 2014 and changes during the six months ended June 30, 2014 is as follows:

		Weighted  average  Exercise  Price	Weighted  average  remaining  contractual  term (in years)	Aggregate  Intrinsic Value
	Options
Outstanding
at beginning of period	461,919	$9.80
Granted	36,292	15.04
Exercised	(130,000)	9.00
Outstanding and vested
at end of period	368,211	$10.60	2.52	$1,024,729

Options to acquire 36,292 shares of common stock were granted on January 1, 2014 to members of our board of directors as part of their normal compensation.  Of the 36,292 options granted on January 1, 2014, 9,075 vested immediately, 9,073 vested on April 1, 2014, 9,073 vest on July 1, 2014 and 9,071 vest on October 1, 2014.

During the six months ended June 30, 2014, 50,000 stock options were exercised for cash resulting in proceeds to the Company of $447,751.  During the same period 80,000 options were exercised, pursuant to provisions of the stock option plan, where the Company received no cash and 57,381 shares of its common stock in exchange for the 80,000 shares issued in the exercise.  The 57,381 shares that the Company received were valued at $727,072, the fair market value of the shares on the dates of exercise.

The intrinsic value of all options exercised during the six months ended June 30, 2014 and 2013 was approximately $513,000 and $26,300, respectively.  The intrinsic value of all options exercised during the three months ended June 30, 2014 and 2013 was approximately $99,000 and zero, respectively.