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STOCK-BASED COMPENSATION
 3 Months Ended
Mar. 31, 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 income for the three months ended March 31, 2014 and 2013 includes approximately $103,000 and $361,000 of non-cash compensation expense, respectively, 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.  The following weighted-average assumptions were used for the options granted during the three months ended March 31, 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 March 31, 2014 and changes during the three months ended March 31, 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
(65,000)
7.32
   
     
Outstanding and vested
       
at end of period
405,994
$10.32
2.73
$1,276,112
     


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 vest on April 1, 2014, 9,073 vest on July 1, 2014 and 9,071 vest on October 1, 2014.

During the three months ended March 31, 2014, 35,000 stock options were exercised for cash resulting in proceeds to the Company of $278,100.  During the same period 30,000 stock options were exercised, pursuant to provisions of the stock option plan, where the Company received no cash and 14,708 shares of its common stock in exchange for the 30,000 shares issued in the exercise.  The 14,708 shares that the Company received were valued at $197,927, the fair market value of the shares on the dates of exercise.

The intrinsic value of all options exercised during the three months ended March 31, 2014 and 2013 was approximately $413,450 and $26,300, respectively.