NOTE 12.  STOCK-BASED COMPENSATION PLAN

 

Under the Company’s 2005 Stock Incentive Plan (the “2005 Plan”), the Board of Directors has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors, officers or consultants of the Company or its subsidiaries.  The 2005 Plan allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units.  The aggregate number of shares of common stock that may be granted through awards under the 2005 Plan to any employee in any calendar year may not exceed 500 shares.  The 2005 Plan will continue in effect until June 2015 unless terminated sooner.

 

During the nine months ended September 30, 2013, the Company issued 560 stock options under the Company’s 2005 Plan to employees of the Company.  Of the 560 options issued, 40 will vest in four equal consecutive quarterly tranches from the date of grant.  35 options granted will vest in three installments as follows: 14 shall vest on December 31, 2014 and the remaining shares shall vest equally on December 31, 2015 and December 31, 2016.  5 options granted will vest in three installments as follows: 2 shall vest on March 31, 2015 and the remaining shares shall vest equally on March 31, 2016 and March 31, 2017.  40 options granted will vest in three installments as follows: 16 shall vest on December 31, 2015 and the remaining shares shall vest equally on December 31, 2016 and December 31, 2017.  The remaining 440 vested immediately.

 

For computing the fair value of the stock-based awards, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

 

 

 

 

 

 

Using these assumptions, the fair value of all stock options granted during the nine months ended September 30, 2013 was $1,906, which will be recognized over the vesting period of the options.  The fair value attributable to the 440 stock options immediately vested was $1,357.

 

During the nine months ended September 30, 2013, the Company awarded 3 shares of common stock to an employee.  At the date the awards were issued the common stock was valued at $7.85 per share.

 

During the nine months ended September 30, 2013, the Company awarded 90 shares of restricted stock to employees.  The vesting of 72 shares is contingent on meeting various service conditions and sales targets, which were deemed probable.  The remaining 18 shares vest in two to five years assuming the employees remain employed through the vesting date.  The fair value of the restricted stock shares granted during the nine months ended September 30, 2013 was $936, which is equal to the market value of the underlying shares on the date of grant.  The fair value will be recognized over the vesting period of two to five years.

 

The total non-cash stock compensation expense related to restricted stock, stock options, and stock awards recorded by the Company during the three and nine months ended September 30, 2013 and 2012, respectively, was as follows:

 

 

The fair value of unvested restricted stock awards is determined based on the market price of our shares of common stock on the grant date.  As of September 30, 2013, there were 1,184 unvested stock options and unrecognized compensation cost of $3,034 related to unvested stock options, as well as 590 unvested restricted stock awards and unrecognized compensation cost of $916 related to unvested restricted stock awards.