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Employee Benefit Plans
 6 Months Ended
Jun. 30, 2012
Employee Benefit Plans
 (6) Employee Benefit Plans

 

On June 6, 2012, shareholders approved a 2,000,000 increase to shares available for award under the Company’s 2006 Omnibus Incentive Compensation Plan (the “2006 Plan”).

 

Stock Compensation

 

For the three months ended June 30, 2012 and June 30, 2011, the Company granted 1,532,500 options to purchase common shares and 250,000 shares of restricted stock, respectively, under the 2006 Plan. For the three months ended June 30, 2012 and 2011, the Company recorded non-cash compensation expense included in selling, general and administrative expenses associated with vesting awards of $0.1 million and $0.2 million, respectively. At June 30, 2012, there was approximately $1.0 million of unrecognized stock compensation with a weighted average remaining life of 2.8 years.

 

For the six months ended June 30, 2012 and June 30, 2011, the Company granted 250,000 and 231,250 shares of restricted stock, respectively, and 1,532,500 and zero options to purchase commons shares, respectively, under the 2006 Plan. For the six months ended June 30, 2012 and 2011, the Company recorded non-cash compensation expense included in selling, general and administrative expenses associated with vesting awards of $0.1 million and $0.2 million, respectively.

 

 

Stock Options

 

Under the 2006 Plan the Company has historically issued restricted stock; however, to further enable us to attract, retain and motivate key employees the Company for the first time issued 1,532,500 options to purchase common stock during the three months ended June 30, 2012. The grants have various vesting features including ratably over three years on each anniversary from the grant date or they become exercisable on the condition that the Company’s fair market value exceed a set price for 20 consecutive trading days.

 

Fair Value Determination-The Company utilized a Black-Scholes-Merton model to value stock options vesting over time, while market exercisable awards were valued using a Monte Carlo simulation. The Company will reconsider the use of the Black-Scholes-Merton model and Monte-Carlo simulation if additional information becomes available in the future that indicates another model would be more appropriate or if grants issued in future periods have characteristics that cannot be reasonably estimated under these models.

 

Volatility-The expected volatility of the options granted was estimated based upon historical volatility of the Company’s share price through weekly observations of the Company’s trading history corresponding to the expected term for Black-Scholes-Merton model and longest available history, or 6.69 years, for the Monte Carlo simulation.

 

Expected Term-Given the lack of historical experience, the expected term of options granted to employees was determined utilizing a plain vanilla approach whereby minimum or median time to vest and the contractual term of 10 years are averaged.

 

Risk-free Interest Rate-The yield was determined based on U.S. Treasury rates corresponding to the expected term of the underlying grants.

 

Dividend Yield-The Black-Scholes-Merton valuation model requires an expected dividend yield as an input. The Company does not anticipate paying dividends; therefore the yield was estimated at zero.

 

The following table summarizes weighted-average assumptions used in our calculations of fair value for the six months ended June 30, 2012:

 

    Black-Scholes-Merton     Monte Carlo Simulation  
             
Volatility     100 %     94 %
Expected life of options (in years)     6       6  
Risk-free interest rate     0.92 %     1.64 %
Dividend yield     0 %     0 %
Forfeiture rate     0 %     0 %