Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

GAAP requires that all stock-based compensation be recognized as an expense in the financial statements and that such costs be measured at the fair value of the award.

The Company has in the past granted options/warrants to consultants. These options generally vest ratably over 24 to 60 months from the date of grant and the Company charges to operations quarterly the current market value of the options using the Black Scholes method. During the nine months of September 30, 2013 and 2012 a charge of $9,069 and $46,259, respectively, and during the three months ended September 30, 2013 and 2012 a (benefit) charge ($8,441) and $73,173, respectively, was recorded to operations reflecting the fair value of the options using the Black Scholes method with the following weighted average assumptions:

	2013	2012
Risk free interest rate	0.3%	0.3%
Expected Life of Options (maximum)	1.1 years	1.8 years
Volatility	40%	55%

During the nine months ended September 30, 2013, the Company granted 282,900 shares of restricted stock to its directors and employees. Directors received 91,500 of these shares of restricted common stock. All of the shares granted to the directors, as well as 3,400 shares granted to employees vested immediately upon grant. The remaining 188,000 shares vest ratably over the 36 months following grant. The market value per share on the date of grant was $3.70.

During the nine months ended September 30, 2012, the Company granted 363,200 shares of restricted common stock to its directors and employees. Directors received 96,500 of these shares of restricted common stock. All of the shares granted to the directors, as well as 5,100 shares granted to employees, vested immediately upon grant. The remaining 261,600 shares vest ratably over the 36 months following grant. The market value per share on the date of grant was $3.38.

In connection with the restricted stock grants to employees and directors, the Company charged $190,576 and $132,645 to operations during the three months ended September 30, 2013 and 2012 respectively, and $922,864 and $741,279 was charged to operations during the nine months ended September 30, 2013 and 2012, respectively.

The Company granted 80,200 fully vested options during 2013 and recorded share-based compensation of $173,120. The Company valued these 2013 grants using the Black-Scholes option pricing model with the following assumptions:

	Risk free interest rate	0.8%
	Expected Life of Options (maximum)	5 years
	Volatility	71%

As of September 30, 2013, remaining unamortized compensation costs in connection with these grants was $949,053 which will be recognized over the next 27 month period.

The Company granted no Employee options during 2012.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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