Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

Note 10. Stock-Based Compensation

The Company records compensation expense for stock options based on the estimated fair value of the options on the date of grant using the BSM model with the assumptions included in the table below. The Company uses historical data among other factors to estimate the expected price volatility, the expected option life, and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The Company calculates expected volatility for stock options and awards using historical volatility as the Company believes the expected volatility will approximate historical volatility. At June 30, 2014, the Company had one stock-based employee compensation plan.

During the second quarter of 2014, the Company granted one director options to purchase 25,000 shares of common stock. The options were priced above fair market value and vested 20% on the grant date, with an additional 20% vesting on the first four anniversaries of the grant date. The options expire ten years from the date of grant.

The assumptions made in estimating the fair value of the options on the grant date based upon the BSM option-pricing method are as follows:



Dividend yield	0.00%
Expected volatility	44.11%
Risk free interest rate	2.02%
Expected life	6 years

During the six-month period ended June 30, 2013, there were no stock options granted. During the six-month periods ended June 30, 2014 and 2013, there were no stock options exercised.

A summary of the Company’s stock option plan as of June 30, 2014 and changes during the six month then ended is listed below:


	Number of Shares	Weighted-Average Exercise Price

Balance at January 1, 2014	246,980	$ 4.53
Granted	25,000	4.39
Exercised	0
Canceled/forfeited/expired	2,500	4.15
Balance at June 30, 2014	269,480	$ 4.52

Vested and exercisable as of
June 30, 2014	109,480

The Company has two equity plans with options outstanding. This roll forward includes both plans.

As of June 30, 2014, there was approximately $203 of unrecognized compensation expense. The Company expects to recognize this expense over the next four years. There was approximately $4 of intrinsic value in the options outstanding and exercisable as of June 30, 2014.

- 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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