17.

STOCK OPTIONS

Stock options

The Company has approved stock option plans for the granting of stock options to employees, Directors, and consultants. Options for the purchase of 700 shares of Common Stock remain outstanding under the 1999 Stock Option Plan, which terminated pursuant to its terms in 2009. Options for the purchase of 2,899,108 shares of Common Stock have been issued under the 2008 Stock Option Plan, which authorized a total of 3,000,000 shares of Common Stock upon the exercise of stock options. Options for the purchase of 1,889,931 shares under the 2008 Stock Option Plan were outstanding as of December 31, 2013. Options for the purchase of 1,000,000 shares of Common Stock remain outstanding under an option granted to Mr. Thomas J. Shaw.

The Compensation and Benefits Committee administers all plans and determines and/or recommends to the Board exercise prices at which options are granted. All executive compensation, including the granting of stock options, is determined by the Compensation and Benefits Committee. Shares issued upon exercise of options come from the Company’s authorized but unissued Common Stock. The options vested over periods up to three years from the date of grant and generally expire ten years after the date of grant. Unvested options issued under the 2008 Stock Option Plan expire immediately after termination of employment.

Employee options

A summary of Director, officer, and employee options granted and outstanding under the Plans is presented below:

	Years Ended December 31,
	2013					2012					2011
	Shares		Weighted Average Exercise Price			Shares		Weighted Average Exercise Price			Shares		Weighted Average Exercise Price

Outstanding at beginning of period	3,367,081		$	0.95		5,433,591		$	0.91		5,508,513		$	0.91
Granted	50,000		1.46			—		—			—		—
Exercised	(584,450	)	(0.92		)	(2,000,865	)	(0.81		)	(67,122	)	(0.81		)
Forfeited	(12,000	)	(2.38		)	(65,645	)	(2.29		)	(7,800	)	(0.85		)

Outstanding at end of period	2,820,631		$	0.95		3,367,081		$	0.95		5,433,591		$	0.91

Exercisable at end of period	2,820,631		$	0.95		3,367,081		$	0.95		5,433,591		$	0.91

No employee options were issued in 2012 or 2011. The fair value of the 2013 grant is $1.06 per share of underlying Common Stock and is estimated on the date of the grant using the Black Scholes pricing model with the following assumptions: expected volatility of 67.53%, risk free interest rate of 3.35%, and an expected life of 8.61 years. This option was issued under the 2008 Stock Option Plan.

The following table summarizes information about Director, officer, and employee options outstanding under the aforementioned plans at December 31, 2013:

Exercise Prices		Shares Outstanding	Weighted Average Remaining Contractual Life	Shares Exercisable
$	8.87	700	0.36	700
$	1.30	754,103	4.88	754,103
$	1.46	50,000	9.37	50,000
$	0.81	2,015,828	5.54	2,015,828

Non-employee options

A summary of options outstanding during the years ended December 31 and held by non-employees is as follows:

	Years Ended December 31,
	2013			2012					2011
	Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price			Shares	Weighted Average Exercise Price

Outstanding at beginning of period	70,000	$	0.81	302,500		$	5.49		302,500	$	5.49
Granted	—	—		—		—			—	—
Exercised	—	—		—		—			—	—
Forfeited	—	—		(232,500	)	(6.90		)	—	—

Outstanding at end of period	70,000	$	0.81	70,000		$	0.81		302,500	$	5.49

Exercisable at end of period	70,000	$	0.81	70,000		$	0.81		302,500	$	5.49

No non-employee options were issued in 2011, 2012, or 2013.

The following table summarizes information about non-employee options outstanding under the aforementioned plans at December 31, 2013:

Exercise Price		Shares Outstanding	Weighted Average Remaining Contractual Life	Shares Exercisable
$	0.81	70,000	5.54	70,000

The Company recorded $52,775; $0; and $0 as stock-based compensation expense in 2013, 2012, and 2011, respectively. The total intrinsic value of options exercised was $1,210,135; $220,268; and $49,626 in 2013, 2012, and 2011, respectively. The aggregate intrinsic value of options outstanding and exercisable with exercise prices lower than market price at December 31, 2013 was approximately $6,158,133. There is no compensation cost related to non-vested stock options to be recognized in the future.

Options Pricing Models – Assumptions

The expected life and forfeiture rate assumptions are based on the vesting period for each option grant and expected exercise behavior. The assumptions for expected volatility and dividend yield are based on recent historical experience. Risk-free interest rates are set using grant-date U.S. Treasury yield curves for the same periods as the expected term.